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Carnegie  Endowment  for  International  Peace 


DIVISION  OF  ECONOMICS  AND  HISTORY 

JOHN   BATES  CLARK,  DIRECTOR 


PRELIMINARY  ECONOMIC   STUDIES   OF  THE  WAR 


EDITED  BY 

DAVID   KINLEY 

Professor  of  Political  Economy,  University  of  Illinois 
Member  of  Committee  of  Research  of  the  Endowment 

No.  6 


EFFECTS  OF  THE  WAR  UPON  INSURANCE, 

WITH  SPECIAL  REFERENCE  TO  THE 

SUBSTITUTION   OF   INSURANCE 

FOR  PENSIONS 

BY 

WILLIAM   F.    GEPHART 

Professor  of  Economics,  Washington  University,  St.  Louis 


NEW  YORK 

OXFORD  UNIVERSITY  PRESS 

AMERICAN  BRANCH:  3S  West  jaNO  Stkikt 
LONDON.  TORONTO,  MELBOURNE.  AND  BOMBAY 

1918 


COPYRIGHT  1918 

BY    THE 

CARNEGIE  ENDOWMENT  FOR  INTERNATIONAL  PEACE 
2  Jackson  Place,  Washington,  D.  C. 


UNIVERSITY  OP  CAUPORNIA 
SANTA  BARBARA  COLLEGE  LIBRARY 


EDITOR'S  PREFACE 

This  study  of  the  effects  of  the  war  on  insurance  by  Professor 
W.  F.  Gephart  of  Washington  University,  St.  Louis,  is  the 
sixth  in  the  series  of  prehminary  studies  on  the  war,  issued  by 
the  Carnegie  Endowment.  The  author  is  a  well  known  authority 
on  life  insurance  and  the  writer  of  two  or  three  books  on  the 
subject.  In  his  study  of  the  topic  he  has  directed  attention  not 
only  to  the  immediate  methods  and  purposes  of  the  government 
in  providing  for  the  families  of  soldiers  by  these  new  schemes 
of  insurance,  but  has  also  inquired  into  the  effect  of  the  large 
draft  of  men  into  military  service,  and  of  the  governmental 
insurance  plans  referred  to  upon  the  ordinary  activities  of  the 
established  life  insurance  companies.  For  it  is  evident  that  their 
constituency  is  largely  diminished  by  the  inclusion,  under  the 
new  government  scheme,  of  a  large  number  of  physically  fit  sub- 
jects of  insurance.  It  is  true,  of  course,  that  their  risks  are  at 
the  same  time  diminished  in  a  considerable  degree  by  the  limita- 
tions of  their  policies  with  reference  to  war.  In  short,  the  influ- 
ence of  the  new  governmental  policy  on  this  old  and  well  estab- 
lished business  is  a  matter  for  earnest  consideration,  and  this 
fact  justifies  the  author  in  his  careful  presentation  of  this  phase 
of  the  subject. 

The  plans  of  life  insurance  put  into  effect  by  the  governments 
of  Great  Britain  and  the  United  States,  in  lieu  of,  or  in  anticipa- 
tion of,  the  old  fashioned  pensions,  are  full  of  interest.  Cer- 
tainly a  country  which  causes  its  members  to  take  the  extraor- 
dinary risks  of  war  is  bound  to  care  for  their  families  in  some 
adequate  way.  The  old  fashioned  method  of  pensions  was 
unsatisfactory  from  several  points  of  view.  Not  only  was  it 
inadequate  in  numerous  instances,  but  it  afforded  many  oppor- 
tunities for  corruption,  political  intrigue  and  unfair  distribution. 
So  far  as  can  be  judged  at  the  present  time  the  new  method  is 


IV  EDITOR  S    PREFACE 

much  superior.  In  any  event,  it  is  a  burden  which  the  people 
ought  to  carry  through  their  government,  at  least  as  largely  as 
the  present  legislation  requires.  The  participation  of  the  insured 
men  in  the  payment  of  premiums  is,  of  course,  a  desirable  fea- 
ture. It  will  not  only  arouse  but  hold  their  interest,  and  it  will 
go  far  towards  preventing  the  imposition  of  an  unfair  burden 
on  the  public.  Taken  as  a  whole,  the  war  life  insurance  legisla- 
tion is  a  notable  forward  step. 

Some  of  the  profoundest  changes  in  insurance  methods  caused 
by  the  war  have  been  in  the  field  of  marine  insurance.  As  the 
author  points  out,  risks  in  this  field  have  been  largely  multiplied. 
The  two  methods  adopted,  one  by  Great  Britain,  and  the  other 
by  our  own  government,  are  indicative,  perhaps,  of  some^  differ- 
ences of  temperament  of  the  peoples  of  the  two  countries.  Both 
governments  are  carrying  the  extra  risks  caused  by  the  war.  But 
Great  Britain  discharges,  or  performs,  its  service  in  this  matter 
through  existing  companies,  while  our  government  has  made  the 
work  that  of  a  special  government  department  created  for  the 
purpose.  Both  methods  indicate  an  extension  of  government 
activity,  but  neither  may  safely  be  relied  on  as  evidence  of  a 
disposition  on  the  part  of  the  public  either  to  extend  the  liability 
of  the  public  treasury  to  cover  other  than  additional  war  risks 
or  to  prolong  the  liability  beyond  the  period  absolutely  necessary. 

In  short,  the  whole  study  shows  that  while  there  is  a  more 
widespread  belief  than  ever  before  in  the  propriety  of  what  is 
commonly  called  social  insurance,  not  only  in  the  field  of  life, 
but  of  other  insurance,  there  is  no  evidence  that  after  the  war 
the  services  of  private  insurance  companies  will  be  dispensed 
with  or  their  field  of  activity  seriously  limited  by  government 
participation  in  insurance. 

David  Kinley, 

Editor. 


FOREWORD 

To  attempt  a  study  of  the  effect  of  the  war  on  the  leading 
forms  of  insurance  in  the  midst  of  the  war,  may  appear  futile 
and  therefore  useless.  That  such  a  study  has  been  made  under 
great  difficulties  is  apparent.  Data  on  some  phases  of  the  effect 
of  the  war  on  insurance  have  been  impossible  to  secure,  especially 
from  the  Central  Powers,  owing  to  the  interruption  of  communi- 
cation. Even  in  the  other  nations,  the  publication  of  much 
insurance  data  has  been  delayed  on  account  of  the  pressure  of 
other  work.  The  private  insurance  companies  have  had  their 
office  forces  reduced  by  enlistment.  In  other  cases  there  is  no 
disposition  to  make  public  some  of  the  effects  which  the  war  has 
had  on  the  business.  Old  laws  and  regulations  governing  insur- 
ance have  been  subjected  to  frequent  material  changes  and  exten- 
sions. And  yet  it  has  been  thought  worth  the  effort  to  make 
such  a  study,  both  because  the  fundamental  readjustments  in 
insurance  legislation  for  the  period  of  the  war  have  already  been 
made,  and  especially  because  a  collection  of  these  changes  and 
a  discussion  of  their  character  and  import  may  be  of  some 
service  in  aiding  in  the  profound  adjustments  which  must  be 
made  later  as  a  result  of  the  war.  Civilized  society  in  all  the 
leading  nations  seems  to  be  on  the  eve  of  a  wide  extension  and 
application  of  the  insurance  principle,  and  whether  this  is  done 
by  direct  government  action  or  by  private  companies  under  the 
supervision  of  the  government,  there  will  need  to  be  a  careful 
study  of  the  plans  adopted  during  the  war  and  the  success  which 
has  been  achieved,  if  the  greatest  measure  of  service  to  society 
is  to  be  secured  by  this  increased  use  of  the  insurance  principle. 

No  one  is  more  conscious  than  the  writer  of  the  regrettable 
gaps  in  the  discussion,  occasioned  by  the  inability  to  secure  data. 
Nor  has  it  been  an  easy  matter  to  decide  what  material  to  use 
of  that  available.    The  writer,  therefore,  directs  the  attention  of 


VI  FOREWORD 

the  reader  to  the  sub-title  of  the  study.  An  effort  has  been  made 
to  make  the  study  as  concise  as  possible  by  selecting  for  state- 
ment and  discussion  only  what  seemed  to  be  the  most  important. 

The  sources  of  the  data  are  given  in  footnotes.  In  many  cases 
direct  quotations  of  some  length  have  been  given  of  fact  mate- 
rial. This  is  especially  true  in  the  case  of  The  Economic  World, 
whose  editor,  Mr.  A.  R.  Marsh,  is  rendering  a  distinct  service  in 
collecting  data  upon  the  changes  which  the  war  is  working  on 
insurance.  To  him  the  writer  expresses  obligation.  To  the 
Carnegie  Endowment  for  International  Peace,  under  whose 
auspices  the  study  has  been  prepared  under  the  direction  of  Dean 
David  Kinley  of  the  University  of  Illinois,  the  writer  is  under 
special  obligations,  as  well  as  to  the  authorities  of  the  Library 
of  Congress  who  have  been  of  invaluable  service  in  aiding  the 
author  in  securing  data. 

W.  F.  Gephart. 

December  i,  1917. 

Washington  University,  St.  Louis. 


CONTENTS 

CHAPTER  PAGE 

I  Introduction — General   Considerations  on  Wai    and 

Insurance  3 

II  The  Effect  of  the  War  on  Life  Insurance 46 

III  The   Effect   of   the   War   on   Social   Insurance   and 

Pensions 143 

IV  The  Effect  of  the  War  on  Marine  Insurance 176 

V  The  Effect  of  the  War  on  Fire  Insurance    207 

APPENDICES 

A      War  Risk  Insurance  Act 249 

B      Amendment  to  War  Risk  Insurance  Act  [S.  2133] . .  253 

C      Amendment  to  War  Risk  Insurance  Act  [H.R.  5723]  257 
D      Application  Blanks  and  Policy  Forms  for  War  Risk 

Insurance 272 

E      Forms   of    Policies    Used    in    Great    Britain    in   the 
Agreement  between  the  Government  and  Insurance 

Companies    286 

Index  299 


EFFECTS  OF  THE  WAR  UPON  INSURANCE, 

WITH    SPECIAL    REFERENCE    TO    THE 

SUBSTITUTION  OF  INSURANCE  FOR 

PENSIONS 


INTRODUCTION 
General  Considerations  on  War  and  Insurance 

Character  of  Insurance 

It  is  in  some  respects  a  mystery  why  society  has  failed  to  use 
more  extensively  the  insurance  principle  as  an  agency  to  further 
social  and  economic  welfare.  This  is  especially  true  when  one  con- 
siders that  the  basic  principle  of  insurance  is  cooperation,  a  kind 
of  social  conduct  for  which  man  by  his  very  nature  is  suited  and 
in  which  either  from  necessity  or  choice  he  has  had  long  expe- 
rience. Socrates  and  earlier  students  of  human  society  pointed 
out  long  since  that  man  is  by  nature  a  social  animal,  and  yet  on 
account  either  of  his  group  conflicts  or  of  his  personal  competi- 
tive conduct  man  is  limited  continually  in  the  use  of  this  natural 
agency,  cooperation,  to  further  his  welfare.  Insurance  is  co- 
operation, organized  on  the  most  scientific  basis.  It  is  but  the 
application  of  the  law  of  average  to  some  of  the  most  important 
risks  to  which  man  is  subject.  In  life  insurance  it  is  a  combina- 
tion of  the  laws  of  mortality  and  the  principles  of  finance,  and  in 
the  other  well  organized  forms  of  insurance  the  same  or  similar 
well  known  principles  are  used  in  devising  the  system  of  insur- 
ance. Yet  there  is  little  general  appreciation  of  the  simplicity  of 
the  insurance  principle.  This  is  doubtless  due  in  part  to  the  fact 
that  sufficiently  well  organized  efforts  on  a  wide  scale  to  popu- 
larize the  insurance  have  never  been  made,  and  in  part  to  the  fact 
that  the  masses  have  had  little  direct  experience  with  the  appar- 
ently complex  principles  of  finance,  mortality  laws,  averages,  and 
other  basic  factors,  underlying  insurance  conduct.     After  giving 

3 


4  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

all  due  credence  to  the  avowed  purposes  of  the  officials  of  private 
insurance  organizations  to  have  the  public  understand  the  prin- 
ciples on  which  their  business  was  conducted,  the  fact  remains 
that  even,  few  of  the  policyholders,  not  to  mention  the  public  at 
large,  have  had  any  considerable  understanding  of  insurance.  It 
has  sometimes  happened  that  campaigns  of  education,  designed  to 
acquaint  the  public  with  the  merits  of  insurance,  have  uncon- 
sciously been  devised  for  the  purpose  of  persuading  the  public  to 
purchase  more  of  the  particular  kind  of  insurance  which  the 
originators  of  the  educational  campaign  had  for  sale.  And  yet 
no  particular  criticism  is  to  be  imputed  to  the  officials  of  the  insur- 
ance organizations.  It  is  a  situation  for  which  neither  the  man- 
agers nor  the  public  can  be  blamed.  The  gulf  between  the  insurer 
and  the  insured  is  yet  very  wide,  but  it  is  one  which  must  be 
closed  if  private  insurance  is  to  justify  itself.  There  is  no  doubt 
that  the  insurance  principle  has  increasingly  been  used  to  meet 
economic  and  social  needs.  During  the  past  half  century  it  has 
been  applied  to  serve  the  purposes  of  private  business,  such  as 
group  insurance,  corporation,  rent  and  profit  insurance;  likewise, 
in  the  purely  social  field  of  human  affairs,  the  insurance  principle 
has  had  new  applications,  such  as  those  of  disability,  sickness,  old 
age,  and  compensation  insurance. 

Scientific  Development 

Nor  is  there  any  doubt  that  the  old  forms  of  insurance  have 
become  more  scientific  along  with  these  extensions  of  new  forms 
of  insurance  which,  as  data  become  more  abundant,  will  place  the 
newer  forms  on  as  scientific  bases  as  these  older  forms  of  insur- 
ance. Marine  insurance,  which  was  one  of  the  earliest  forms  of 
insurance  to  be  well  organized,  yet  retains  in  its  standard  policy 
some  of  the  provisions  of  the  early  policies  that  are  strangely  out 
of  harmony  with  modern  conditions,  but  this  has  not  prevented 
the  extensive  application  of  marine  insurance  to  the  twentieth 
century  world  of  international  trading  which  is  happily  free,  at 
least  in  times  of  peace,  from  "  pirates,  rovers,  thieves,  jettisons. 


INTRODUCTION  5 

letters  of  marque  and  contremarque,  detainments  of  all  Kings, 
Princes  and  Peoples." 

In  life  insurance,  there  have  been  refinements  in  the  mortality 
tables,  the  construction  of  tables  of  select  lives,  and  the  tabulation 
of  increasingly  accurate  vital  statistics.  Medical  and  sanitary 
science  have  been  making  such  rapid  advances,  the  collection  of 
accurate  vital  statistics  has  so  greatly  improved  in  so  many  coun- 
tries, that  students  of  life  insurance  had  begun  to  believe  that 
nothing  could  invalidate  the  increasingly  scientific  principles, 
upon  which  the  business  of  life  insurance  was  conducted. 

In  fire  insurance,  of  the  older  forms  of  insurance  perhaps  the 
least  scientific,  so  far  as  the  determination  of  rates  on  a  fair 
and  equitable  basis  was  concerned,  there  had  been  considerable 
advance  in  scientific  systems  of  rate  determination  by  a  more 
careful  and  complete  separation  of  the  risks  and  an  analysis  of 
their  constituent  elements.  In  all  the  preceding  forms  of  insur- 
ance uncertainty  as  to  rates  on  individual  risks  or  groups  of  risks 
was  being  replaced  by  scientific  rates. 

In  the  new  forms  of  social  insurance,  great  interest  and 
popular  approval  were  being  manifested.  The  great  service  to 
society  rendered  by  the  use  of  the  insurance  principle  in  the  case 
of  compensation  insurance  for  injured  industrial  workers,  or 
health  or  old  age  or  accident  insurance  compensated  for  any  inac- 
curacies from  a  scientific  standpoint  in  the  rates  which  were 
charged  to  individuals  or  groups. 

In  short,  the  ability  to  predict  with  accuracy  the  happening  of 
future  events,  which  is  the  prime  prerequisite  of  all  insurance, 
was  becoming  increasingly  possible  and  hence  insurance  of  all 
kinds  was  becoming  increasingly  scientific. 

Social  Character 

Insurance  is  but  a  cooperative  organization  on  the  most  scien- 
tific basis.  It  has  all  the  good  features  which  characterize  indi- 
vidualism, and  none  of  its  evils,  inasmuch  as  the  individual 
member  of  the  insurance  group  is  left  the  largest  measure  of 


6  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

individual  conduct,  while  through  his  association  in  the  insured 
group,  he  is  able  to  secure  all  the  good  results  which  come  from 
collective  or  cooperative  conduct.  As  contrasted  with  many 
other  cooperative  associations,  the  liberty  surrendered,  and  the 
restricted  conduct  imposed,  are  infinitesimal  when  compared 
with  gains  achieved  through  the  insurance  organization.  Indeed, 
the  individual  secures  for  himself  the  impossible  of  accomplish- 
ment as  an  individual.  He  frees  himself,  as  an  insured  indi- 
vidual, from  the  chaotic  and  evil  workings  of  chance. 

In  the  life  insurance  group  he  secures  for  his  dependents  that 
protection  which  only  the  fortunate  beneficiaries  of  the  normal 
operation  of  the  law  of  mortality  and  of  the  uncertainties  of 
struggle  for  economic  security  enjoy.  In  the  propertj^  insured 
group,  he  has  restored  to  him  by  the  group  his  losses.  Likewise, 
in  other  forms  of  insurance,  the  insured  individual,  or  his 
dependents,  is  restored  to  the  status  approximating  that  preced- 
ing the  misfortune,  and  this  without  any  necessary  relation 
between  the  cost  to  the  individual  insured  and  the  benefits  which 
he  or  his  beneficiaries  receive.  And  insurance  is  the  only  known 
institution  by  which  this  end  can  be  achieved  without  a  semblance 
of  charity.  Insurance  is  always  concerned  with  the  future  which 
it  is  constantly  discounting  in  terms  of  the  misfortunes  of  the 
present.  It  offers  the  single  method  known  to  socialize  charity; 
that  is,  a  means  of  protecting  the  individual  against  most  of  the 
contingencies  in  life  which  make  him,  or  his  dependents,  look  to 
society  for  aid  in  times  of  misfortune. 

And  yet  insurance  does  not  replace  or  produce  either  tangible 
or  intangible  capital.  It  simply  distributes  what  is  already  in 
existence.  It  takes  from  the  many  to  give  to  the  few.  Insur- 
ance itself  is  an  economic  and  social  burden.  It  is  one  of  the 
costs  of  human  society.  It  is  to  be  valued  only  because  it  lessens 
certain  other  costs  or  burdens  which  society  by  its  very  organiza- 
tion must  bear.  Insurance,  viewed  as  a  mathematical  process,  is 
always  one  of  subtraction  and  not  of  addition.  It  is  always  of 
this  character  for  society  and  ought  to  be  such  for  the  individual 
who  receives  the  benefit  of  the  insurance.     The  life  still  lived, 


INTRODUCTION  7 

the  property  not  burned,  the  body  not  injured  by  accident,  the 
surety  bond  not  paid — each  should  be  valued  more  highly  than 
any  sum  paid  to  the  insured  or  his  beneficiary.  Insurance  is  thus 
the  most  social  of  institutions,  and  its  uses  as  a  social  and  eco- 
nomic agency  have  scarcely  yet  been  realized.  Its  social  advan- 
tages are  as  constructive  as  those  of  war  are  destructive.  As 
the  peoples  of  the  nations  have  been  brought  into  closer  relation, 
their  interdependence  has  greatly  increased  and  hence  any  such 
destructive  agency  as  war  has  much  more  serious  and  permanent 
evil  effects  on  society.  Its  influences  ramify  throughout  the 
social  body.  It  is  not,  therefore,  surprising  that  there  is  an 
increasing  tendency  to  use  a  constructive  agency — insurance — as 
broad  in  its  scope  and  influence  as  is  the  destructive  agency 
which  it  seeks  to  combat — war.  Not  the  least  of  the  already 
apparent  evil  results  of  the  great  war  is  the  effect  which  it  is 
having  on  the  development  in  the  use  of  the  insurance  principle. 

War  Hazards 

It  has  been  stated  that  insurance  in  all  its  forms  was  becoming 
increasingly  scientific,  and  it  is  in  its  effect  on  this  development 
that  war  is  having  on  insurance  one  of  its  most  serious  effects. 
That  is,  war  is  interrupting  this  scientific  development  of  insur- 
ance because  it  introduces  new  hazards  which  can  not  be  accu- 
rately calculated. 

Since  the  United  States  found  it  necessary  to  enter  the  war,  no  depart- 
ment of  American  business  has  found  it  more  imperative  to  set  about 
accommodating  itself  with  the  utmost  energy  and  the  utmost  speed  to  the 
requirements  of  the  new  situation  than  has  insurance.  In  every  direction 
the  activities  of  the  managers  of  American  insurance  to  this  end  have  been 
most  striking.  The  task  has  naturally  been  a  most  difficult  and  burden- 
some one,  because  at  least  three  different  orders  of  considerations  have 
had  to  be  kept  steadily  in  mind ;  and  these  considerations  have  been  in 
certain  important  respects  of  a  conflicting  character.  The  first  of  these  con- 
siderations is  that  of  patriotic  duty,  involving  the  employment  of  our  entire 
system  of  insurance  in  all  its  varieties  to  ease,  in  so  far  as  this  is  practicable 
^nd  feasible,  the  strains  and  hazards  of  war  for  the  community  at  large. 
•^ar  brings  with  it  strange  shiftings  of  the  incidence  and  of  the  collateral 
'ects  of  the  risks  of  life.     While  it  is  being  prosecuted,  the  greatest  dif- 

\ 


8  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

ferences  are  developed  as  between  individuals  and  groups  of  individuals, 
and  also  as  between  diversely  located  communities,  as  regards  the  gravity 
of  these  risks.  It  is  in  the  public  interest  that  these  excesses  of  risk  for  the 
relatively  few  should  be  distributed  as  evenly  as  possible  over  the  entire 
population,  and  it  is  a  part  of  the  patriotic  duty  of  insurance  to  do  what  it 
can  to  accomplish  this  even  distribution. 

As  against  this  consideration,  however,  there  arises  another,  namely,  that 
from  their  very  nature  the  extra  hazards  of  war  have  in  them  a  large  ele- 
ment of  incalculability,  since  war  is  not  the  nominal  state  of  human  society 
and  thus  from  its  comparative  rarity  as  well  as  from  the  great  changes 
which  take  place  from  generation  to  generation  in  the  methods  of  conduct- 
ing it,  it  affords  little  opportunity  for  collecting  dependable  experience  in 
the  insurance  sense.  Guesswork,  therefore,  necessarily  plays  an  inordinate 
part  in  the  calculation  of  the  true  cost  of  war  risks  to  the  insurers.  Yet 
underwriters  have  always  to  bear  in  mind  the  overriding  obligation  to  main- 
tain their  solvency  and  not  to  do  injustice  to  the  general  body  of  their 
policyholders  in  order  that  they  may  show  an  overfull  measure  *of  patriotic 
generosity  to  the  group  or  groups  of  policyholders  particularly  exposed  to 
the  hazards  of  war. 

There  is  no  doubt  that  war  will  increase  the  mortality  rate  of  life  insur- 
ance companies,  but  to  what  extent  there  is  all  too  little  statistical  data  to 
give  any  evidence. 

Modern  warfare  is  such  as  to  cause  a  tremendous  death  rate  among  those 
exposed.  On  the  other  hand,  the  improvements  in  hospital  practice  and  war 
relief  work  have  been  so  influential  as  to  have  a  favorable  effect  upon  pro- 
longing the  lives  of  the  disabled,  and,  in  fact,  effecting  many  cures  which  in 
previous  wars  would  have  been  regarded  as  impossible  of  accomplishment. 

So  far  as  life  insurance  is  concerned,  there  is  bound  to  be  a  greater  expo- 
sure to  the  war  hazard  than  ever  before,  as  the  proportion  of  policyholders 
to  population  is  far  greater  and  the  per  capita  amount  carried  is  also  greater 
than  at  the  time  of  previous  wars. 

It  has  now  been  made  clear  that  the  casualties  of  war  are  not  confined 
to  those  exposed  to  shot  and  shell,  bomb  and  bayonet.  The  repercussions 
of  war  upon  the  civil  population  are  of  the  most  serious  and  far  reaching 
character.  The  mortality  both  of  the  old  and  of  the  very  young  is  greatly 
increased  by  the  strains,  psychologic  and  economic,  that  war  creates.  Normal 
mental  and  physical  health  for  all  classes  of  society  is  remarkably  difficult 
to  maintain  under  the  stresses  of  war.  Griefs  and  anxieties  are  ever  draw- 
ing upon  mental  health ;  industrial  pressure,  due  to  the  insatiable  demand 
for  war  material,  produces  intensified  and  cumulative  fatigues  for  great 
masses  of  workers,  male  and  female.  Both  infectious  and  degenerative  dis- 
eases increase  rapidly  among  the  civil  population  in  time  of  war.  Tuber- 
culosis gets  a  fresh  hold  on  the  community,  as  a  result  of  depressing  effects 
of  war ;  and  the  death-rate  from  it  tends  to  rise  sharply.  Industrial  and 
other  accidents,  also,  grow  more  numerous,  partly  in  consequence  of  height 
ened  effort  and  speed  in  industry  and  of  the  carelessness  of  workers  indue 
by  weariness,  monotony  and  ever-present  strain,  and  partly  by  reason  of  i 


INTRODUCTION  9 

continuous  preoccupation  of  masters  and  workers  alike  with  apprehensions, 
cares  and  sorrows  outside  their  customary  round  of  work.  Finally,  not  a 
single  country  engaged  in  the  present  war  has  been  able  to  avoid  entirely 
inequalities  and  uncertainties  in  the  supply  and  distribution  of  the  necessaries 
of  life,  particularly  articles  of  food.  Despite  all  governmental  effort  and 
care,  prices  of  these  necessaries  have  fluctuated  in  the  most  violent  way  in 
all  the  belligerent  countries ;  supplies  have  been  irregular  to  a  greater  or 
less  extent ;  and  it  has  too  frequently  happened  that  considerable  classes  or 
groups  of  all  the  populations  involved  have  been  forced  by  excessive  prices 
simply  to  do  without  many  things  essential  to  their  health  and  well-being. 
Undernutrition  and  malnutrition  have  occurred  on  a  far  wider  scale  in 
even  the  most  comfortably-off  European  countries  than  the  great  majority 
of  Americans  in  the  least  suspect;  and  the  average  of  health,  vitality  and 
efficiency  for  the  populations  of  these  countries  as  a  whole  has  been  cor- 
respondingly reduced,  to  the  undoubted  detriment  of  the  military  and  naval 
forces  themselves. 

Safeguarding  the  health,  vitality  and  well-being  of  a  people  at  war  is  as 
much  a  work  of  nation-wide  cooperation  and  of  trained  efficiency  of  the 
highest  type,  as  is  the  provision  and  equipment  of  armed  forces  on  land 
and  sea,  and  the  supplying  of  these  forces  with  adequate  food,  munitions, 
medical  and  surgical  care,  and  the  like.  In  peace,  as  has  been  demonstrated 
of  late  years  in  the  United  States,  great  improvement  can  be  brought  about 
in  the  conditions  of  the  public  health,  through  the  more  or  less  loosely  asso- 
ciated and  not  firmly  organized  and  centralized  endeavors  of  a  multitude  of 
individuals  and  of  public  and  private  agencies  of  a  more  or  less  official  or 
formal  kind.  It  is  more  than  doubtful,  however,  whether  this  method  even 
approaches  adequacy  in  time  of  war,  when  the  most  important  desideratum 
of  all  is  that  no  smallest  part  of  the  body  politic  should  be  remote  from 
instant  touch  with  a  central  authority,  competent  and  ready  to  act  on  the 
spot,  when  occasion  arises. ' 

War  and  Property  Insurance 

In  many  forms  of  property  insurance  old  hazards  have  been 
increased  and  new  hazards  have  arisen. 

Fires  are  Hkely  to  be  more  frequent  even  in  those  parts  of  a 
country  which  are  not  within  the  area  of  actual  hostilities. 
Under  the  necessity  of  speeding  up  production,  factories  are 
under  pressure.  Machines  are  run  at  higher  speed  and  more 
continuously.  Workmen  are  likely  to  be  less  careful  in  respect 
to  agencies  producing  fires.  Material  is  carelessly  stored.  Waste 
accumulates.    Less  attention  than  in  normal  times  is  given  to  the 

*  The  Economic  World,  n.  s.,  vol.  xiii,  No.  17,  p.  596. 


lO  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

inspection  of  fire  protective  devices,  such  as  sprinkler  systems. 
When  a  fire  occurs,  the  losses  are  likely  to  be  greater  on  contents 
because  of  their  accumulation  and  their  improper  storage. 
Already  there  is  a  marked  increase  in  property  loss  due  to  fires 
in  the  United  States,  and  while  the  accusation  is  frequently  made 
that  the  loss  is  due  to  acts  of  enemies,  and  while  this  is  doubt- 
less true  in  some  cases,  yet  it  is  safe  to  predict  that  careful 
investigation  will  show  that  by  far  the  largest  amount  of  the 
increased  loss  is  due  to  the  abnormal  conditions  surrounding 
property  in  war  times  and  not  to  a  marked  increase  in  incen- 
diarism. 

In  the  areas  of  the  nations  over  which  the  war  is  actually 
being  fought,  the  increase  in  property  loss  is  enormous.  Not 
only  are  there  cases  of  deliberate  burning  of  property*  by  the 
enemy,  but  in  many  other  cases  property  is  set  on  fire  as  a  result 
of  the  actual  combat  by  such  instruments  of  warfare  as  the  artil- 
lery, or,  if  not  actually  burned,  it  is  demolished.  Nor  is  this 
loss  confined  to  buildings.  The  method  of  conducting  this  great 
war  is  such  that  %o  all  intents  the  land  is  temporarily  destroyed. 
Before  much  of  it  is  suitable,  either  for  agricultural  or  building 
purposes,  but  especially  for  the  former,  a  considerable  expendi- 
ture of  capital  and  labor  will  be  necessary.  The  whole  landscape 
in  many  places  is  destroyed.  Deep  trenches  have  been  dug  and 
craters  made  by  the  powerful  shells  are  found  everywhere.  The 
ground  is  strewn  with  the  rubbish  of  the  contest.  Trees,  forest 
and  fruit,  have  been  cut,  torn  or  blown  down  by  the  enemy  and 
his  destructive  artillery. 

Cattle  and  other  stock  animals  have  been  destroyed,  or  their 
natural  reproduction  has  been  prevented  by  the  war.  Much  of 
this  loss  is  a  final  and  uncompensated  one.  There  was  no  insur- 
ance on  much  of  this  property.  To  some  of  it  the  insurance 
principle  had  not  been,  and  could  not  be,  applied.  Not  only  is 
civilized  society  devoting  the  greater  part  of  its  normal  produc- 
tive energies  to  the  socially  unproductive  activities  of  war,  but 
what  is  even  worse,  the  machines  devised  by  this  socially  unpro- 
ductive labor  and  the  energies  of  the  people  are  devoted  to 


INTRODUCTION  1 1 

destroying  the  accumulated  savings,  capital  goods  and  natural 
agencies  of  the  past  productive  activities. 

War  brings  a  nation  to  the  same  situation  that  protracted  ill- 
ness or  death  brings  to  a  frugal  family.  It  compels  a  recourse 
to  the  use  of  saving  funds  from  past  industry.  It  tends  towards 
social  poverty. 

Nor  does  insurance  exercise  its  normally  protective  functions. 
It  is  well  known,  for  example,  that  the  standard  fire  insurance 
policy  does  not  cover  losses  due  to  riot,  civil  insurrection  or  war. 
Hence,  much  property  loss  which  to  the  individual  owner  would 
be  met  by  the  funds  from  the  insurance  organization  is  not  cov- 
ered. That  is,  war  prevents  the  use  of  the  cooperative  principle 
in  insurance.  And  yet  there  has  been  an  extension  of  the  insur- 
ance principle  in  property  insurance  to  meet  some  of  the  risks 
which  have  arisen  as  a  result  of  the  war. 

New  Kinds  of  Insurance 

The  most  striking  illustration  of  the  rapid  and  yet  wholly 
satisfactory  working  out  of  a  war  insurance  problem  is  perhaps 
to  be  found  in  what  has  been  done  with  regard  to  what  is  popu- 
larly, though  not  very  accurately,  known  as  bombardment  insur- 
ance. Here  the  obstacles  were  great,  because  when  our  war  with 
Germany  began  the  law  of  the  most  important  of  our  states  from 
an  insurance  point  of  view,  New  York,  actually  made  it  impos- 
sible to  write  this  form  of  insurance  at  all.  New  legislation,, 
always  hard  to  obtain,  was  necessary;  and  even  when  the  New 
York  Legislature  had  passed  one  bill  authorizing  bombardment 
insurance,  it  was  found  that  this  so  restricted  the  coverage  as  to 
make  it  unadapted  to  the  actual  needs  of  property  owners. 
Hence,  still  further  amendment  of  the  law  was  necessary,  again 
calling  for  the  expenditure  of  time  and  effort.  Nevertheless,  so 
skilful  and  rapid  was  the  work  of  the  fire  underwriter  having  the 
matter  in  hand,  that  the  signature  of  the  Governor  of  New  York 
had  hardly  been  placed  on  the  final  amendatory  act,  when  a  new 
and  complete  war  risk  policy  was  ready  for  use,  covering  sub- 


12  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

stantially  all  the  hazards  to  property  arising  from  war  or  its 
attendant  conditions,  i.e.,  war,  invasion,  insurrection,  riot,  civil 
war,  civil  commotion  (including  strikes),  military  or  usurped 
power,  bombardment  of  all  kinds,  fire  or  explosion  directly 
caused  by  any  of  the  foregoing  and  explosion  alone.  Further- 
more, a  complete  scheme  of  application  of  the  new  insurance  had 
been  worked  out. 

Another  interesting  illustration  of  the  extension  of  the  insur- 
ance principle  is  in  the  case  of  risks  of  property  loss  due  to  the 
operation  and  attacks  by  airships.  In  some  cases  this  aerial 
insurance,  both  for  property  and  lives,  has  been  written  by  the 
government,  and  in  some  cases  by  the  private  insurance  com- 
panies. ,  » 

In  scarcely  any  other  field  of  insurance  has  the  war  had  such 
a  disruptive  influence  as  in  the  case  of  marine  insurance.  Here, 
on  account  of  the  long  practice  of  this  branch  of  insurance  and 
the  accumulated  data,  the  business  was  well  organized  and  sys- 
tematized. But  the  use  of  the  submarine  introduced  a  wholly 
new  and  incalculable  factor  in  the  risk.  As  a  result,  the  private 
companies  in  all  the  leading  countries  so  much  limited  their 
insuring  of  vessels  and  their  cargoes,  that  the  governments  very 
generally  had  to  assume  these  risks  in  part  or  in  whole. 

Social  Insurance  and  Pensions 

In  the  field  of  social  insurance,  the  war  is  having,  or  promises 
to  have,  both  negative  and  positive  efifects.  In  the  first  place,  it 
has  prevented  the  carrying  out  in  many  countries  of  certain 
initiated  systems  of  social  insurance,  such  as  sickness,  maternity, 
invalidity,  compensation  insurance  and  old  age  pensions.  A 
developed  social  conscience  had  come  to  realize  the  social  obliga- 
tion to  devise  systems  of  insurance  to  meet  these  problems,  and 
considerable  progress  had  been  made  in  the  leading  European 
countries  and  the  United  States.  The  carrying  out  of  these  plans 
called  for  large  amounts  of  funds  froin  the  national  treasuries, 
but  under  the  stress  of  the  necessity  of  war  to  secure  funds  to 


INTRODUCTION  1 3 

meet  the  actual  war  needs,  there  has  been  more  or  less  abandon- 
ment or  modification  of  these  social  insurance  systems.  There 
are,  however,  promised  some  positive  effects  of  the  war  on  social 
insurance.  In  no  other  field  of  human  endeavor  is  there  greater 
opportunity  to  use  to  the  improvement  of  society  the  principle 
of  insurance  than  in  these  various  kinds  of  social  insurance.  An 
aroused  democracy,  which  is  promised  as  one  effect  of  the  war, 
may  insist  that  the  insurance  principle  be  extensively  used  to 
meet  these  social  problems,  and  what  was  granted  by  the  ruling 
classes  as  a  concession  may  be  demanded  by  the  masses;  that  is, 
the  use  by  the  governments  of  the  insurance  principle  to  meet 
the  problems  of  invalidity,  disability,  death,  old  age,  unemploy- 
ment. In  this  connection  the  use  of  the  insurance  principle  to 
meet  the  problems  which  in  the  past  have  been  sought  to  be  met 
by  a  pension  system  is  important.  As  is  well  known,  most  of  the 
leading  nations  have  had  what  is  known  as  a  pension  problem. 
In  the  early  period  of  developing  nationality,  when  the  soldier 
fought  for  his  share  of  the  booty  or  for  a  wage,  and  when  a 
social  conscience  was  in  its  germ  stage  of  development,  no  prob- 
lem was  to  be  found.  But  at  a  later  date,  when  nationality  had 
become  fully  developed  and  recognized,  and  when  appeals  were 
made  to  the  patriotism  of  the  citizen  to  defend  his  country,  an 
obligation  on  the  part  of  the  nation  was  recognized  to  those  who 
thus  defended  the  nation  and  to  the  dependents  of  the  soldier. 
There  thus  arose  the  question  of  a  service  pension,  a  disability 
pension,  and  a  pension  for  dependents,  and  the  practices  with 
respect  to  granting  these  different  pensions  varied  greatly  in  dif- 
ferent countries.  In  those  nations  with  representative  forms  of 
government,  there  was  a  tendency  to  be  liberal  in  the  granting  of 
pensions,  due  in  part  to  the  pressure  which  could  be  brought  to 
bear  by  the  beneficiaries  on  their  representatives.  In  the  United 
States,  in  particular,  the  pension  system  has  been  one  which  has 
brought  little  credit  to  representative  government.  It  has  often 
become  a  political  party  question,  and,  what  is  worse,  in  its 
actual  operation  it  has  entailed  the  appropriation  of  enormous 
sums  of  money  without  securing  the  ends  to  be  achieved.    It  has 


14  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

been  unjust  often  to  the  soldier  and  his  dependents.  The 
patriotism  and  gratitude  of  a  people  have  often  been  played  upon 
and  prostituted  to  serve  the  ends  of  politicians.  In  view  of  the 
history  of  the  pension  system,  especially  in  the  United  States,  it 
is  not  surprising  that,  upon  the  entrance  of  this  country  into  the 
war,  there  was  a  widespread  wish  that  the  country  might  be 
spared  a  repetition  of  this  pension  history. 

The  insurance  principle  offered  a  superior  substitute,  and  pro- 
vision was  early  made  to  meet  the  situation  by  the  use  of  this 
principle.  There  is  no  reason  to  doubt  that  the  plans  which  have 
been  devised  and  which  are  discussed  in  detail  at  a  later  place  in 
this  study  will  meet  the  problem  in  a  much  more  adequate 
manner.  ^ 

Insurance  Contracts  and  the  War 

The  effect  of  the  war  on  insurance  in  its  scientific  aspects  and 
in  its  practical  conduct  has  been  indicated  in  the  preceding  dis- 
cussion. But  there  have  been  more  direct  effects  of  the  war  on 
insurance  in  all  its  branches.  Insurance  has  shared  in  the  great 
development  of  international  trade  during  the  past  century,  and 
at  the  outbreak  of  the  war  many  individuals  found  themselves 
in  possession  of  insurance  policies  on  their  lives  or  property 
which  had  been  issued  by  the  foreign  companies  of  nations  with 
which  their  own  nation  was  at  war.  Immediately  questions 
arose  as  to  the  validity  of  these  contracts:  Could  premiums  be 
paid  to  the  agents  of  these  foreign  companies  who  were  in  resi- 
dence in  the  country  of  the  insured  ?  Could  such  agents  continue 
to  transact  an  insurance  business  for  the  foreign  company,  if,  as 
is  usually  the  case  in  the  United  States,  such  foreign  company 
was  required  to  keep  a  deposit  in  the  country  where  the  insurance 
was  written?  Were  such  agents  in  truth  the  real  agents  of  the 
principal  now  that  the  country  of  the  insurer  and  insured  were 
at  war?  These  and  a  number  of  other  questions  arose.  In 
other  words,  it  was  a  question  of  the  status  of  commercial  con- 
tracts during  the  time  of  war  between  enemies,  as  well  as  the 
status  of  alien  representatives  of  such  companies  with  respect  to 
their  power  to  bind  their  principals. 


INTRODUCTION  I 5 

International  law  has  dealt  only  in  an  incidental  way  with  the 
effect  of  war  on  commercial  contracts.  Such  contracts  are  pri- 
marily a  subject  of  national  law,  since  an  inherent  character  of 
the  sovereignty  of  a  nation  is  its  power  to  determine  the  terms 
of  contracts,  not  only  among  its  own  citizens,  but  also  to  lay 
down  on  what  terms  and  on  what  conditions  an  alien  may  be 
permitted  to  contract  and  transact  business  with  its  citizens.' 

All  the  leading  countries  engaged  in  the  war  have  taken  such 
action  against  alien  subjects,  residing  in  the  country,  as  seemed 
to  be  necessary  to  protect  the  nation.  In  many  cases  such  aliens 
have  been  compelled  to  register.  Their  movements  in  the  coun- 
try and  their  places  of  residence  have  been  restricted.  In  some 
cases  they  have  been  segregated  and  in  many  cases  they  have 
been  under  close  surveillance.  The  English  courts  reaffirmed  the 
old  rule  that  alien  enemies  have  no  locus  standi  in  the  courts,  but 
if  such  aliens  are  registered,  they  have  a  right  to  sue  in  the 
courts.  The  Court  of  Appeal  in  England  has  held  that  a  claim 
can  not  be  made  by  an  agent  for  an  enemy's  business  by  reason 
of  having  received  from  his  principal  power  of  attorney;  nor 
can  such  an  agent  be  appointed  a  receiver  of  the  business  of  his 
principal  for  the  purpose  of  satisfying  the  creditors  of  his 
principal. 

In  most  cases,  shares  of  stock  owned  by  alien  enemies  have 
not  been  disturbed,  but  dividends  have  been  held,  pending  the 
close  of  the  war.  The  general  principle  of  the  English  law  is 
that  the  war  discontinues  all  commercial  intercourse  of  British 
subjects  and  those  of  an  enemy.  All  treaties,  civil  contracts  and 
rights  in  and  to  property  are  either  suspended  or  terminated. 
Since  the  origin  of  much  of  United  States  law  and  legal  proce- 
dure is  of  English  derivation,  the  same  rules  are  largely  observed 
in  the  United  States  with  respect  to  contracts  in  time  of  war. 
The  insurance  of  property  of  the  enemy  is  therefore  presump- 
tively an  illegal  contract,  since  it  is  a  species  of  trade  and  inter- 
course with  the  enemy.    Likewise,  the  sending  of  money  or  funds 

'  For  a  discussion  of  this  subject,  see  Journal  of  the  Society  of  Compara- 
tive Legislation,  vol.  xv ;  G.  G.  Phillimore,  Trading  with  the  Enemy. 


l6  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

as  insurance  premiums  to  an  enemy  country  is  illegal.  All  com- 
mercial partnerships  with  the  enemy  terminate  with  the  declara- 
tion of  war.  In  the  early  period  of  the  war  the  following  gen- 
eral proclamation  with  respect  to  insurance  was  issued  by 
England. 

Not  to  make  or  enter  into  any  new  marine,  life,  fire  or  other  policy  or 
contract  of  insurance  (including  reinsurance)  with  or  for  the  benefit  of  an 
enemy;  nor  to  accept  or  give  effect  to  any  insurance  of  any  risk  arising 
under  any  policy  or  contract  of  insurance  (including  reinsurance)  made  or 
entered  into,  with  or  for  the  benefit  of  an  enemy  before  the  outbreak  of 
war;  and  in  particular  as  regards  treaties  or  contracts  of  reinsurance  cur- 
rent at  the  outbreak  of  the  war  to  which  an  enemy  is  a  party  or  in  which 
an  enemy  is  interested,  not  to  cede  to  the  enemy  or  to  accept  from  the  enemy 
under  any  such  treaty  or  contract  any  risk  arising  under  any  policy  or  con- 
tract of  insurance  (including  reinsurance)  made  or  entered  into  after  the 
outbreak  of  war  or  any  share  in  any  such  risk. 

Provided  always  that  where  an  enemy  has  a  branch  locally  situated  in 
British,  Allied,  or  neutral  territory  not  being  neutral  territory  in  Europe, 
transactions  by  or  with  such  branch  shall  not  be  treated  as  transactions  by 
or  with  an  enemy.  But  where  an  enemy  has  a  branch  locally  situated  in 
British,  Allied,  or  neutral  territory  which  carries  on  the  business  of  insurance 
or  reinsurance  of  whatever  nature,  transactions  by  or  with  such  branch  in 
respect  to  the  business  of  insurance  or  reinsurance  shall  be  considered  as 
transactions  by  or  with  an  enemy.' 

Public  Custodians  of  Insurance  Property 

Since  the  property  value,  represented  by  debts  to  enemy  aliens 
which  were  continually  maturing,  was  considerable,  and  since 
there  were  many  other  kinds  of  property  values  owned  by  alien 
enemies,  it  was  necessary,  if  confiscation  was  not  to  be  prac- 
ticed, that  some  arrangements  be  made  by  the  government  to 
take  care  of  this  property  of  alien  enemies.  The  usual  practice 
has  been  to  appoint  a  public  custodian  who  has  charge  under  the 
trading  with  enemy  acts  of  all  property  of  such  aliens.  These 
public  custodians  have,  among  other  duties,  the  receiving  of  all 
payments  arising  out  of  transactions  entered  into  before  the  out- 
break of  the  war,  or  of  such  other  business  or  contracts  as  are 
permitted.     An  amendment  to  the  original  trading  with  enemy 

^Manual  of  Emergency  Legislation  (England),  19. 


INTRODUCTION  I7 

act  in  England  made  the  Board  of  Trade  such  custodian  during 
the  war,  and  left  the  matter  of  the  general  disposition  of  such 
property  to  be  dealt  with  by  Orders  in  Council  after  the  close  of 
the  war.  The  public  custodian  of  the  Board  of  Trade  receives 
all  dividends,  interest,  shares  of  profits  and  other  credits  of 
enemies.  These  funds  are  to  be  dealt  with  as  the  Treasury 
directs.  Particular  information  as  to  enemy  property  is  to  be 
supplied  by  trustees  of  enemies  and  enemy  property  can  be  vested 
in  such  trustee  by  an  order  of  a  High  Court  judge. 

If  any  funds  had  been  paid  to  a  bank  or  other  financial  agent 
or  concern,  such  funds  were  required  to  be  turned  over  to  this 
public  custodian,  appointed  by  the  Board  of  Trade.  Fines  and 
imprisonment  penalties  were  established  for  a  violation  of  this 
provision  of  the  law.  Such  property  could  not  be  attached,  but 
the  custodian  could  upon  order  of  the  court  pay  debts  out  of  it. 

The  legal  status  of  the  marine  insurance  business  of  enemy 
nations  has  occasioned  the  greatest  difficulties.  This  is  due  in 
part  to  the  fact  that  the  marine  insurance  companies,  especially 
of  some  of  the  European  nations,  such  as  England  and  Germany, 
had  either  original  or  reinsurance  contracts  in  large  numbers  on 
the  property  of  enemies.  Then,  too,  ocean  transportation  has 
assumed  a  position  of  commanding  importance  in  this  war  on 
account  of  the  necessity  of  shipping  food  supplies  and  munitions 
of  war,  as  well  as  the  extensive  use  of  the  submarine  and  other 
agencies  of  destruction  against  the  shipping  of  the  enemy. 

Rights  of  Foreign  Companies 

In  the  United  States  the  problem  was  especially  difficult 
because  of  the  fact  that  the  largest  part  of  the  marine  insurance 
business -is  held  by  foreign  insurance  companies  and  a  consider- 
able amount  of  it,  either  as  direct  insurance  or  as  reinsurance,  by 
German  companies. 

In  the  early  period  of  the  war  there  was  an  attempt  to  control 
the  problem  through  a  proclamation  issued  by  the  President. 


l8  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

The  reasons  for  such  a  proclamation  are  indicated  by  its  con- 
tents, which  are  as  follows : 

Whereas,  Certain  insurance  companies  incorporated  under  the  laws  of  the 
German  Empire  have  been  admitted  to  transact  the  business  of  insurance  in 
various  states  of  the  United  States  by  means  of  separate  United  States 
branches,  established  pursuant  to  the  laws  of  such  states,  and  are  now 
engaged  in  business  under  the  supervision  of  the  insurance  departments 
thereof,  with  assets  in  the  United  States  deposited  with  insurance  depart- 
ments, or  in  the  hands  of  resident  trustees,  citizens  of  the  United  States; 
for  the  protection  of  all  policyholders  within  the  United  States ;  and, 

Whereas,  The  interests  of  the  citizens  of  the  United  States  in  the  protec- 
tion afforded  by  such  insurance  are  of  great  magnitude,  so  that  it  is  deemed 
to  be  important  that  the  agencies  of  such  companies  in  the  United  States 
be  permitted  to  continue  in  business ;  now, 

Therefore,  I,  Woodrow  Wilson,  President  of  the  United »  States  of 
America,  by  virtue  of  the  powers  vested  in  me  as  such,  hereby  declare  and 
proclaim  that  such  branch  establishments  of  German  insurance  companies, 
now  engaged  in  the  transaction  of  business  in  the  United  States,  pursuant 
to  the  laws  of  the  several  states,  are  hereby  authorized  and  permitted  to 
continue  the  transaction  of  their  business  in  accordance  with  the  laws  of 
such  state  in  the  same  manner  and  to  the  same  extent  as  though  a  state  of 
war  did  not  now  exist. 

Provided,  however,  that  all  funds  of  such  establishments,  now  in  the 
possession  of  their  managers  or  agents,  or  which  shall  hereafter  come  into 
their  possession,  shall  be  subject  to  such  rules  and  regulations  concerning 
the  payment  and  disposition  thereof  as  shall  be  prescribed  by  the  insurance 
supervising  officials  of  the  state  in  which  the  principal  office  of  such  estab- 
lishment in  the  United  States  is  located,  but  in  no  event  shall  any  funds 
belonging  to  or  held  for  the  benefit  of  such  companies  be  transmitted  out- 
side of  the  United  States  nor  be  used  as  the  basis  for  the  establishment, 
directly  or  indirectly,  for  any  credit  within  or  outside  of  the  United  States, 
to  or  for  the  benefit  or  use  of  the  enemy  or  any  of  his  allies  without  the 
permission  of  this  government. 

(Signed)  Woodrow  Wilson, 

President. 

Upon  the  issuance  of  this  proclamation,  the  officials  of  the 
states  in  which  such  insurance  organizations  had  been  admitted 
to  do  business,  published  the  conditions  to  govern  such  foreign 
marine  insurance  companies.  The  orders  of  the  Superintendent 
of  Insurance  of  New  York,  the  state  in  which  the  largest  amount 
of  this  insurance  is  transacted,  show  the  character  of  this 
supervision. 


INTRODUCTION  I9 

Superintendent  of  Insurance  Phillips  of  New  York  issued  the 
following  statement  with  respect  to  the  manner  in  which  the 
principles  contained  in  the  proclamation  will  be  administered  by 
the  New  York  Insurance  Department: 

In  view  of  the  proclamation  of  the  President,  German  insurance  com- 
panies admitted  in  this  state  will  be  permitted  to  continue  the  transaction 
of  business  the  same  as  if  a  state  of  war  did  not  exist  between  this  country 
and  Germany,  provided  such  companies  meet  the  capital  and  deposit  require- 
ments of  our  statutes  and  maintain  the  statutory  reserves. 

In  accordance  with  the  proclamation,  rules  and  regulations  will  be  pre- 
scribed to  require  the  managers  of  such  companies  to  keep  in  the  United 
States  all  of  the  assets  now  or  which  may  hereafter  come  into  their  pos- 
session for  the  benefit  of  American  policyholders.  I  am  not  prepared  to 
state  the  precise  rules  and  regulations  which  may  be  adopted  by  this  depart- 
ment, except  to  say  they  will  be  sufficient  to  prevent  any  portion  of  the  assets 
being  used  for  the  benefit  of  the  enemy  or  any  of  its  allies.* 

But  this  did  not  prove  adequate  for  the  situation  as  it  devel- 
oped, and  the  causes  for  the  change  and  the  second  proclamation 
of  the  President  are  set  forth  as  follows:' 

It  is  a  well  known  fact  that  the  insurance  capital  of  this  country  is  inade- 
quate for  the  provision  of  safe  coverage  for  all  the  risks  of  various  kinds 
requiring  insurance.  Indeed,  in  all  the  departments  of  insurance,  the  foreign 
countries,  through  their  branches  domiciled  here,  play  a  very  large  and 
probably  indispensable  part  in  supplying  us  with  the  insurance  we  need. 
Consideration  of  this  state  of  things  and  the  perception  that  the  methods  of 
organization  and  operation  of  American  branches  of  foreign  companies  com- 
pelled by  our  insurance  laws  gives  these  branches  the  character  of  essen- 
tially independent  insurance  institutions,  led  President  Wilson  to  issue  a 
proclamation  under  the  terms  of  which  even  the  American  branches  of 
German  insurance  companies  were  permitted  to  carry  on  their  underwriting 
just  as  in  time  of  peace,  provided  they  discontinued  all  business  and  finan- 
cial relations  with  their  Home  Office. 

Later,  however,  events  led  the  government  to  believe  that  a  distinction 
should  be  made  between  marine  and  marine  war  risk  insurances  and  rein- 
surances, as  carried  or  participated  in  by  American  branches  of  German 
insurance  companies,  and  the  other  forms  of  insurance.  Information  was 
found  mysteriously  to  reach  the  German  government  with  respect  to  the 
voyages  and  the  cargoes  of  ships  clearing  from  ports  of  the  United  States ; 
and  through  this  information  the  German  submarines  seemed  to  find  it  easy 

*  The  Economic  World,  n.  s.,  vol.  xiii,  No.  15,  p.  527. 
'  Ibid.,  vol.  xiv,  No.  3,  p.  93. 


20  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

to  intercept  such  vessels  and  to  destroy  them.  It  was  charged  that  the  data 
given  to  the  American  branches  of  German  marine  insurance  and  reinsurance 
companies  in  connection  with  the  marine  and  marine  war  risk  insurance 
offered  to  them,  and  curiously  enough  often  taken  by  them,  were  not  held 
as  confidential,  but  were  surreptitiously  conveyed  to  the  German  naval  authori- 
ties with  the  object  of  enabling  them  to  plan  the  destruction  of  the  ships 
by  submarines,  practically  without  danger  to  these  piratical  craft.  There 
was  much  public  talk  of  vessels  leaving  American  ports  and  taking  very 
unusual  courses  to  their  destinations,  yet  met  by  submarines  at  unexpected 
places  in  mid-ocean  and  destroyed.  An  embellishment  of  several  of  these 
accounts  was  a  reported  remark  of  the  submarine  commander  to  the  master 
of  the  unfortunate  merchantman,  to  the  effect  that  the  latter  was  one  or 
more  days  late  in  reaching  the  scene  of  the  rencontre.  From  such  incidents 
as  this  it  was  deduced  that  the  submarine  commander  had  been  given  in 
advance  precise  details  of  the  voyage  of  the  doomed  ship,  such  as  only  the 
owners  and  the  master  could  possibly  possess  apart  from  the  marine  under- 
writers, to  whom  supposedly  all  information  of  this  character  most  be  given 
in  connection  with  the  insurance  or  reinsurance  contract  entered  into  by 
them.  .   .   . 

Positive  evidence,  often  unobtainable,  is  unnecessary  to  warrant  govern- 
mental action  in  cases  of  this  kind.  Hence  President  Wilson  deemed  it  wise, 
in  the  interest  of  the  country,  to  prohibit  American  branches  of  German 
insurance  companies  from  writing  marine  and  marine  war  risk  insurances 
or  reinsurances  in  the  United  States  for  the  duration  of  the  war.  This  pro- 
hibition is  contained  in  a  proclamation  of  the  President,  issued  on  Saturday, 
July  14,  the  text  of  which  is  as  follows : 

President  Wilson's  Proclamation 

Whereas,  Certain  insurance  companies  incorporated  under  the  laws  of  the 
German  Empire  have  been  admitted  to  transact  the  business  of  marine  and 
war  risk  insurance  in  various  states  of  the  United  States  by  means  of 
separate  state  branches  established  pursuant  to  the  laws  of  such  states,  and 
are  now  engaged  in  such  business  under  the  supervision  of  the  insurance 
departments  thereof,  with  assets  in  the  United  States  deposited  with  insur- 
ance departments  or  in  the  hands  of  resident  trustees,  citizens  of  the  United 
States,  for  the  protection  of  all  policyholders  in  the  United  States ;  and. 

Whereas,  The  nature  of  marine  and  war  risk  insurance  is  such  that  those 
conducting  it  must  of  necessity  be  in  touch  with  the  movements  of  ships 
and  cargoes,  and  it  has  been  considered  by  the  government  of  great  impor- 
tance that  this  information  should  not  be  obtained  by  alien  enemies ; 

Now,  therefore,  I,  Woodrow  Wilson,  President  of  the  United  States  of 
America,  by  virtue  of  the  powers  vested  in  me  as  such,  hereby  decree  and 
proclaim  that  such  branch  establishments  of  German  insurance  companies 
now  engaged  in  the  transaction  of  business  in  the  United  States,  pursuant 
to  the  laws  of  the  several  states,  are  hereby  prohibited  from  continuing  the 
transaction  of  the  business  of  marine  and  war  risk  insurance  either  as  direct 


INTRODUCTION  21 

insurers  or  reinsurers;  and  all  individuals,  firms  and  insurance  companies 
incorporated  under  the  laws  of  any  of  the  state's  or  territories  of  the  United 
States  or  of  any  foreign  country,  and  established  pursuant  to  the  laws  of 
such  states  and  now  engaged  in  the  United  States  in  the  business  of  marine 
and  war  risk  insurance,  either  as  direct  insurers  or  reinsurers,  are  hereby 
prohibited  from  reinsuring  with  companies  incorporated  under  the  laws  of 
the  German  Empire,  no  matter  where  located ;  and  all  persons  in  the  United 
States  are  prohibited  from  insuring  against  marine  or  war  risks  with 
insurance  companies  incorporated  under  the  laws  of  the  German  Empire  or 
with  individuals,  firms  and  insurance  companies  incorporated  under  the  laws 
of  any  of  the  states  or  territories  of  the  United  States  or  of  any  foreign 
country  and  now  engaged  in  the  business  of  marine  or  war  risk  insurance 
in  the  United  States,  which  reinsure  business  originating  in  the  United 
States  with  companies  incorporated  under  the  laws  of  the  German  Empire, 
no  matter  where  located. 

The  foregoing  prohibitions  shall  extend  and  operate  as  to  all  existing 
contracts  for  insurance  and  reinsurance  which  are  hereby  suspended  for  the 
period  of  the  war,  except  that  they  shall  not  operate  to  vitiate  or  prevent 
the  insurance  or  reinsurance  of  and  the  payment  or  receipt  of  premiums 
on  insurance  or  reinsurance  under  existing  contracts  on  vessels  or  interest 
at  risk  on  the  date  of  this  proclamation,  and  such  insurance  or  reinsurance, 
if  for  a  voyage,  shall  continue  in  force  until  arrival  at  destination,  and  if 
for  time,  until  thirty  days  from  the  date  of  this  proclamation,  but  if  for 
a  voyage  at  that  time,  until  the  arrival  at  destination. 

Nothing  herein  shall  be  construed  to  operate  to  prevent  the  payment  or 
receipt  of  any  premium  or  claim  now  due  or  which  may  become  due  on 
or  in  respect  to  insurances  or  reinsurances  not  prohibited  by  this  proc- 
lamation. 

That  all  funds  of  such  German  companies  now  in  the  possession  of  their 
managers  or  agents,  or  which  shall  hereafter  come  into  their  possession, 
shall  be  subject  to  such  rules  and  regulations  concerning  the  payment  and 
disposition  thereof  as  shall  be  prescribed  by  the  insurance  supervising  offi- 
cials of  the  state  in  which  the  principal  office  of  such  establishment  in  the 
United  States  is  located,  but  in  no  event  shall  any  funds  belonging  to  or 
held  for  the  benefit  of  such  companies  be  transmitted  outside  of  the  United 
States,  nor  be  used  as  the  basis  for  the  establishment,  directly  or  indirectly, 
of  any  credit  within  or  outside  of  the  United  States  to  or  for  the  benefit 
or  use  of  the  enemy  or  any  of  his  allies  without  the  permission  of  this 
government. 

In  witness  whereof,  I  have  hereunto  set  my  hand  and  caused  the  seal  of 
the  United  States  to  be  affixed. 

Done  at  the  District  of  Columbia  this  13th  day  of  July,  in  the  year  of 
our  Lord  one  thousand  nine  hundred  and  seventeen  and  of  the  independ- 
ence of  the  United  States  the  one  hundred  and  forty-second. 

WooDROw  Wilson. 


22  effects  of  the  war  upon  insurance 

Trading  with  the  Enemy  Acts  and  Insurance 

The  whole  matter  in  all  the  leading  nations  at  war  was  later 
and  fully  covered  in  the  various  "  trading  with  the  enemy  "  acts 
which  were  passed. 

In  the  Trading  with  the  Enemy  Act  of  the  United  States,  a 
special  case  is  made  of  insurance  companies  whose  owners  are 
citizens  of  Germany  or  her  allies,  in  that  the  property  of  the 
United  States  branches  of  these  companies  does  not  have  to  be 
turned  over  to  the  Alien  Property  Custodian,  to  be  administered 
by  him  in  accordance  with  the  intent  of  the  law.  Under  a 
licensing  system  these  companies  may  continue  their  business  in 
the  United  States,  though  of  course  without  the  right  to  trans- 
mit funds  or  to  continue  business  intercourse  with  their  home 
offices.  Moreover,  enemy  insurance  companies  are  wholly  for- 
bidden to  write  policies  of  marine  or  war  risk  insurance.  The 
text  of  that  part  of  the  act.  Section  4  (a),  is  as  follows : 

Section  4  (a).  Every  enemy  or  ally  of  enemy  insurance  or  reinsurance 
company,  and  every  other  enemy  or  ally  of  enemy,  doing  business  within 
the  United  States  through  an  agency  or  branch  office,  or  otherwise,  may, 
within  thirty  days  after  the  passage  of  this  act,  apply  to  the  President  for 
a  license  to  continue  to  do  business;  and,  within  thirty  days  after  such  appli- 
cation, the  President  may  enter  an  order  either  granting  or  refusing  to  grant 
such  license.  The  license,  if  granted,  may  be  temporary  or  otherwise  and 
for  such  period  of  time  and  may  contain  such  provisions  and  conditions 
regulating  the  business,  agencies,  managers  and  trustees  and  the  control  and 
disposition  of  the  funds  of  the  company  or  of  such  enemy  or  ally  of  enemy 
as  the  President  shall  deem  necessary  for  the  safety  of  the  United  States, 
and  any  license  granted  hereunder  may  be  revoked  or  regranted  or  renewed 
in  such  manner  and  at  such  times  as  the  President  shall  determine. 

Provided,  however,  that  reasonable  notice  of  his  intent  to  refuse  to  grant 
a  license  or  to  revoke  a  license  granted  to  any  reinsurance  company  shall  be 
given  by  him  to  all  insurance  companies  incorporated  within  the  United 
States  and  known  to  the  President  to  be  doing  business  with  such  rein- 
surance company. 

Provided,  further,  that  no  insurance  company,  organized  within  the  United 
States,  shall  be  obliged  to  continue  any  existing  contract  or  treaty,  entered 
into  prior  to  the  beginning  of  the  war,  with  any  enemy  or  ally  of  enemy 
insurance  or  reinsurance  company,  but  any  such  company  may  abrogate  and 
cancel  any  such  contract  or  treaty  by  serving  thirty  days'  notice  in  writing 
upon  the  President  of  its  election  to  abrogate  such  contract  or  treaty. 


INTRODUCTION  23 

For  a  period  of  thirty  days  after  the  passage  of  this  act  and  further 
pending  the  entry  of  such  order  by  the  President  after  application  made  by 
any  enemy  or  ally  of  enemy  insurance  or  reinsurance  company,  within  such 
thirty  days  as  above  provided,  the  provisions  of  the  President's  proclama- 
tion of  April  sixth,  nineteen  hundred  and  seventeen,  relative  to  agencies  in 
the  United  States  of  certain  insurance  companies,  as  modified  by  the  pro- 
visions of  the  President's  proclamation  of  July  thirteenth,  nineteen  hundred 
and  seventeen,  relative  to  marine  and  war  risk  insurance,  shall  remain  in 
full  force  and  effect  so  far  as  it  applies  to  such  German  insurance  com- 
panies, and  the  conditions  of  said  proclamation  of  April  sixth,  nineteen 
hundred  and  seventeen,  as  modified  by  said  proclamation  of  July  thirteenth, 
nineteen  hundred  and  seventeen,  shall  also  during  said  period  of  thirty  days 
after  the  passage  of  this  act,  and  pending  the  order  of  the  President  as 
herein  provided,  apply  to  any  enemy  or  ally  of  enemy  insurance  or  rein- 
surance company,  anything  in  this  act  to  the  contrary  notwithstanding. 

It  shall  be  unlawful  for  any  enemy  or  ally  of  enemy  insurance  or  rein- 
surance company  to  whom  license  is  granted  to  transmit  out  of  the  United 
States  any  funds  belonging  to  or  held  for  the  benefit  of  such  company,  or  to 
use  any  funds  as  the  basis  for  establishment  directly  or  indirectly  of  any 
credit  within  or  outside  of  the  United  States  to,  or  for  the  benefit  of,  or  on 
account  of,  an  enemy  or  ally  of  enemy. 

For  a  period  of  thirty  days  after  the  passage  of  this  act  and  further 
pending  the  entry  of  such  order  by  the  President  after  application  made 
within  such  thirty  days  by  any  enemy  or  ally  of  enemy,  other  than  an  insur- 
ance or  reinsurance  company,  as  above  provided,  it  shall  be  lawful  for  such 
enemy  or  ally  of  enemy  to  continue  to  do  business  in  this  country  and  for 
any  person  to  trade  with,  to,  from,  for,  on  account  of,  on  behalf  of  or  for 
the  benefit  of  such  enemy  or  ally  of  enemy,  anything  in  this  act  to  the  con- 
trary notwithstanding:  Provided,  however,  that  the  provisions  of  sections 
three  and  fifteen  hereof  shall  apply  to  any  act  or  attempted  act  of  transmis- 
sion or  transfer  of  money  or  other  property  out  of  the  United  States,  and 
to  the  use  or  attempted  use  of  such  money  or  property  as  the  basis  for  the 
establishment  of  any  credit  within  or  outside  of  the  United  States  to  or  for 
the  benefit  of,  or  on  behalf  of,  or  on  account  of,  an  enemy  or  ally  of  enemy. 

If  no  license  is  applied  for  within  thirty  days  after  the  passage  of  this 
act,  or  if  a  license  shall  be  refused  to  any  enemy  or  ally  of  enemy,  whether 
insurance  or  reinsurance  company,  or  other  person,  making  application,  or 
if  any  license  granted  shall  be  revoked  by  the  President,  the  provisions  of 
sections  three  and  fifteen  hereof  shall  forthwith  apply  to  all  trade  or  attempt 
to  trade  with,  to,  from,  for,  by,  on  account  of,  or  on  behalf  of  or  for  the 
benefit  of  such  company  or  other  persons : 

Provided,  however,  that  after  such  refusal  or  revocation,  anything  in  this 
act  to  the  contrary  notwithstanding,  it  shall  be  lawful  for  a  policyholder  or 
for  an  insurance  company,  not  an  enemy  or  ally  of  enemy,  holding  insurance 
or  having  effected  reinsurance  in  or  with  such  enemy  or  ally  of  enemy 
insurance  or  reinsurance  company  to  receive  payment  of,  and  for  such  enemy 
or  ally  of  enemy  insurance  or  reinsurance  company  to  pay,  any  premium, 
return  premium,  claim,  money,  security  or  other  property  due  or  which  may 


24  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

become  due  on  or  in  respect  to  such  insurance  or  reinsurance  in  force  at 
the  date  of  such  refusal  or  revocation  of  license;  and  nothing  in  this  act 
shall  vitiate  or  nullify  then  existing  policies  or  contracts  of  insurance  or 
reinsurance,  or  the  conditions  thereof;  and  any  such  policyholder  or  insur- 
ance company,  not  an  enemy  or  ally  of  enemy,  having  any  claim  to  or  upon 
money  or  other  property  of  the  enemy  or  ally  of  enemy  insurance  or  rein- 
surance company  in  the  custody  or  control  of  the  alien  property  custodian 
or  of  the  Treasurer  of  the  United  States,  may  make  application  for  the 
payment  thereof  and  may  institute  suit  as  provided  in  section  nine  hereof. 

(b)  That  during  the  present  war  no  enemy,  or  ally  of  enemy,  and  no 
partnership  of  virhich  he  is  a  member  or  was  a  member  at  the  beginning 
of  the  war,  shall  for  any  purpose  assume  or  use  any  name  other  than  that 
by  which  such  enemy  or  partnership  was  ordinarily  known  at  the  beginning 
of  the  war,  except  under  license  from  the  President. 

Whenever  during  the  present  war  in  the  opinion  of  the  President  the 
public  safety  or  public  interest  requires,  the  President  may  prohibit  any  or 
all  foreign  insurance  companies  from  doing  business  in  the  Uiiited  States, 
or  the  President  may  license  such  company  or  companies  to  do  business 
upon  such  terms  as  he  may  deem  proper. 

Regulations  in  England 

In  England  the  regulation  of  insurance  in  enemy  nation  com- 
panies early  became  a  matter  of  control  through  proclamations 
and  trading  with  the  enemy  acts,  which  have  been  extended 
with  the  progress  of  the  war  and  the  development  of  new  condi- 
tions. The  business  of  the  home  companies  with  respect  to  the 
insuring  of  enemy  property  was  also  regulated. 

The  insurance  by  a  British  subject  of  the  property  of  an  enemy 
against  capture  at  sea  by  the  British  navy  was  made  illegal 
whether  the  contract  was  made  before  or  after  the  war.  Like- 
wise, the  insurance  by  a  British  subject  of  an  alien  enemy's  pri- 
vate property  on  land,  even  if  effected  before  the  outbreak  of  the 
war,  was  dissolved,  at  all  events  if  the  loss  took  place  in  a  mode 
recognized  in  international  law,  that  is,  in  the  course  of  a  mili- 
tary offensive,  or  if  it  was  due  to  acts,  performed  on  the  grounds 
of  military  necessity.  In  practically  all  other  cases  when  insur- 
ance was  effected  before  the  outbreak  of  the  war,  the  policy 
remained  in  force  and  was  valid  although  it  could  not  be  sued 
upon  during  the  duration  of  the  war.^ 

^  The  Law  of  Contract  During  War,  William  F.  Trotter. 


INTRODUCTION  2$ 

But  the  English  Trading  with  the  Enemy  Act  warned  persons 
not  to  enter  into  an  insurance  contract  with  or  for  the  benefit  of 
an  enemy  during  the  war  nor  to  give  effect  to  such  insurance 
made  before  the  war/ 

Court  Decisions  on  Status  of  War  Insurance  Contracts 

No  large  number  of  cases  has  come  before  the  courts  of  the 
yarious  nations  for  adjudication  under  the  circumstances  previ- 
ously discussed,  and  which  these  laws  seek  to  govern.  Doubt- 
less the  present  war  will  result  in  many  such  cases  being  pre- 
sented to  the  courts. 

However,  in  order  that  the  purely  judicial  aspect  of  the  sub- 
ject may  be  presented,  the  following  abstract  and  adaptation  of 
insurance  cases  and  closely  related  ones  is  given :  ^ 

American  Cases 

(i)  Every  species  of  intercourse  with  the  enemy  is  illegal. 
The  prohibition  is  not  limited  to  mere  commercial  intercourse. 
Johnson,  J.,  in  The  Rapid  (1814)  (8  Cranch,  155,  162,  163)  : 

Whether  this  was  a  trading  in  the  eye  of  the  prize  law  such  as  will  sub- 
ject the  property  to  capture. 

The  force  of  the  argument  on  this  point  depends  upon  the  terms  made 
use  of.  If  by  trading  in  prize  law  was  meant  that  signification  of  the  term 
which  consists  in  negotiation  or  contract,  this  case  would  certainly  not  come 
under  the  penalties  of  the  rule.  But  the  object,  policy  and  spirit  of  the  rule 
is  to  cut  off  all  communication  or  actual  locomotive  intercourse  between 
individuals  of  the  belligerent  states.  Negotiation  or  contract  has  therefore 
no  necessary  connection  with  the  offense.  Intercourse  inconsistent  with 
actual  hostility  is  the  offense  against  which  the  operation  of  the  rule  is 
directed,  and  by  substituting  this  definition  for  that  of  trading  with  an  enemy 
an  answer  is  given  to  this  argument. 

The  Julia  (1814)  (8  Cranch,  181,  193,  194,  195): 

^Manual  of  Emergency  Legislation,  1914  (England). 

'  Memorandum  of  American  Cases  and  Recent  English  Cases  on  the  Law 
of  Trading  with  Enemy,  Charles  Warren,  former  Assistant  Attorney  General 
of  the  United  States. 


26  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

Nor  is  there  any  difference  between  direct  intercourse  between  the  enemy 
countries  and  an  intercourse  through  the  medium  of  a  neutral  port.  The  lat- 
ter is  as  strictly  prohibited  as  the  former. 

See  also  Story,  J.,  in  The  Julia  (1813)  (i  Gallison,  594,  602, 
603): 

...  It  would  seem  a  necessary  result  of  a  state  of  war  to  suspend  all 
negotiations  and  intercourse  between  the  subjects  of  the  belligerent  nations. 
By  the  war  every  subject  is  placed  in  hostility  to  the  adverse  party.  He 
is  bound  by  every  effort  of  his  own  to  assist  his  own  government  and  to 
counteract  the  measures  of  its  enemy.  Every  aid,  therefore,  by  personal 
communication  or  by  other  intercourse  which  shall  take  off  the  pressure  of 
the  war  or  foster  the  resources  or  increase  the  comforts  of  the  public  enemy, 
is  strictly  inhibited.  No  contract  is  considered  as  valid  between  enemies, 
at  least  so  far  as  to  give  them  a  remedy  in  the  courts  of  either  government, 
and  they  have,  in  the  language  of  the  civil  law,  no  ability  to  sustain  a 
persona  standi  in  judicio.  The  ground  upon  which  a  trading  with  the  enemy 
is  prohibited  is  not  the  criminal  intentions  of  the  parties  engaged  in  it  or 
in  the  direct  and  immediate  injury  to  the  state.  The  principle  is  extracted 
for  a  more  enlarged  policy,  which  looks  to  the  general  interests  of  the 
nation,  which  may  be  sacrificed  under  the  temptation  of  unlimited  inter- 
course or  sold  by  the  cupidity  of  corrupted  avarice. 

See  also  The  St.  Lawrence  (1814)  (8  Cranch,  434);  The 
Alexander  (1814)  (8  Cranch,  169);  The  Rugen  (1816) 
(i  Wheaton,  62);  United  States  v.  Barber  (181 5)  (9  Cranch, 
243);  United  States  v.  Sheldon  (1817)  (2  Wheaton,  119). 

Story,  J.,  in  The  Liverpool  Packet  (1813)  (i  Gallison,  512, 
521,  522)  : 

I  look  back  upon  that  decision  [The  Julia]  without  regret,  and  after  much 
subsequent  reflection  can  not  doubt  that  it  has  a  perfect  foundation  in  the 
principles  of  public  law.  To  the  many  authorities  there  stated  I  might  have 
added  the  pointed  language  of  Sir  W.  Scott,  in  the  Jonge  Pieter  (4  Rob., 
79),  that  "without  the  license  of  the  government  no  communication,  direct 
or  indirect,  can  be  carried  on  with  the  enemy,"  and  the  rule  strongly  illus- 
trative of  the  principle,  which  is  acknowledged  as  early  as  the  year-books 
and  has  received  sanction  down  to  the  present  times,  that  every  contract  and 
engagement  made  with  the  enemy  pending  war  is  utterly  void. 

The  Lord  Wellington  (1814)  (2  Gallison,  102). 

The  case  of  United  States  v.  Barker  (1820,  Cir.  Ct.  N.Y.) 


INTRODUCTION  2/ 

(i  Paine,  156),  constitutes  a  departure  from  the  general  rule. 
The  rigid  rule  was  reaffirmed  in  Scholefield  v.  Eichelberger 
(1883)  (7  Pet.,  586,  593) : 

The  doctrine  is  not  at  this  day  to  be  questioned,  that  during  a  state  of 
hostility  the  citizens  of  the  hostile  states  are  incapable  of  contracting  with 
each  other.  For  near  twenty  years  this  has  been  acknowledged  as  the  set- 
tled doctrine  of  this  court,  and  in  a  case  which  proves  it  to  be  a  rule  of 
very  general  and  rigid  application  (The  Rapid)  .  .  .  The  question  has 
never  yet  been  examined  whether  a  contract  for  necessaries,  or  even  for 
money  to  enable  the  individual  to  get  home,  would  not  be  enforced,  and 
analogies  familiar  to  the  law  as  well  as  the  influence  of  the  general  rule  in 
international  law,  that  the  severities  of  war  are  to  be  diminished  by  all  safe 
and  practical  means,  might  be  appealed  to  in  support  of  such  an  exception. 
But  at  present  it  may  be  safely  affirmed  that  there  is  no  recognized  excep- 
tion but  permission  of  a  state  to  its  own  citizen,  which  is  also  implied  in 
any  treaty  stipulation  to  that  effect  entered  into  by  the  belligerents. 

The  Jecker  y.  Montgomery  (1855)  (18  How.,  no,  112,  119): 

The  consequence  of  this  state  of  hostility  is  that  all  intercourse  and  com- 
munication between  them  is  unlawful.  .   .   . 

We  have  seen,  by  the  authorities  cited,  that  intercourse  with  the  enemy  is 
sufficient  cause  for  personal  punishment  and  for  the  confiscation  of  property; 
that  it  is  a  cause  originating  in  and  inflexibly  enforced  by  necessity  for 
guarding  the  public  safety. 

(2)  All  persons  doing  business  with  the  enemy,  whether 
citizens  of  the  United  States  or  citizens  of  the  other  belligerent 
nation  or  neutrals,  are  as  to  their  property  to  be  deemed  enemies. 

Prize  Cases  (1862)  (2  Black,  674) : 

But  in  defining  the  meaning  of  the  term  "  enemies'  property,"  we  will  be 
led  into  error  if  we  refer  to  Fleta  and  Lord  Coke  for  their  definition  of  the 
word  "  enemy."  It  is  a  technical  phrase  peculiar  to  prize  courts,  and  depends 
upon  principles  of  public  policy  as  distinguished  from  the  common  law. 

Whether  property  be  liable  to  capture  as  "  enemies'  property "  does  not 
in  any  manner  depend  on  the  personal  allegiance  of  the  owner.  "  It  is  the 
illegal  traffic  that  stamps  it  '  as  enemies'  property.'  It  is  of  no  conse- 
quence whether  it  belongs  to  an  ally  or  a  citizen.  (8  Cranch,  384.)  The 
owner,  pro  hac  vice,  is  an  enemy."     (3  Wash.  C.C.R.,  183.) 

The  produce  of  the  soil  of  the  hostile  territory,  as  well  as  other  property 
engaged  in  the  commerce  of  the  hostile  power,  as  the  source  of  its  wealth 
and  strength,  are  always  regarded  as  legitimate  prize,  without  regard  to  the 
domicile  of  the  owner,  and  much  more  so  if  he  reside  and  trade  within 
their  territory. 


28  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

The  Flying  Scud  (1867)  (6  Wall.,  263,  266) : 

Although  they  are  Mexican  citizens,  yet,  being  established  in  business  in 
the  enemies'  country,  must  be  regarded  according  to  settled  principles  of 
prize  law  as  enemies,  and  their  cotton  as  enemies'  property. 

See  Juragua  Iron  Co.  v.  United  States  (1909)  (212  U.S., 
297.  305,  306)  : 

Cuba,  being  a  part  of  Spain,  was  enemy's  country,  and  all  persons,  what- 
ever their  nationality,  who  resided  there  were,  pending  such  war,  to  be 
deemed  enemies  of  the  United  States  and  of  all  its  people.  The  plaintiff, 
though  an  American  corporation,  doing  business  in  Cuba,  was,  during  the 
war  with  Spain,  to  be  deemed  an  enemy  to  the  United  States  with  respect 
to  its  property  found  and  then  used  in  that  country,  and  such  property 
could  be  regarded  as  enemy's  property,  liable  to  be  seized  and  confiscated  by 
the  United  States  in  the  progress  of  the  war  then  being  prosecuted. 

So  in  Young  v.  United  States  (1877)  (97  U.S.,  39,  60)  : 

All  property  within  enemy  territory  is  in  law  enemy  property  just  as  all 
persons  in  the  same  territory  are  enemies. 

30  Hogsheads  of  Sugar  v.  Boyle  (1815)  (9  Cranch,  191). 
The  Sarah  Starr  (1861)   (Blatchford's  Prize  Cases,  74,  76)  : 

.  .  .  Loyal  citizens  or  neutrals  who  .  .  .  have  a  mercantile  domicile  in 
an  enemy  country  are  regarded  in  the  prize  courts  in  their  commercial  deal- 
ings and  transactions  there  as  enemies  in  relation  to  vessels  and  cargoes 
owned  by  them  and  captured  at  sea.  .    .    . 

The  American  authorities  are  equally  explicit  that  a  neutral,  even  enjoy- 
ing the  privilege  of  consul,  domiciled  and  trading  in  a  belligerent  country, 
is,  in  war,  deemed  a  belligerent,  and  his  acts  are  clothed  with  the  character 
of  one  of  its  subjects ;  and  he  can  neither  hold  title  to  property  acquired  in 
such  country  during  war,  nor  confer  it  upon  other,  against  the  interests 
imparted,  by  capture  at  sea,  to  adversary  belligerents.  ' 

The  Mary  Clinton  (1863)  (Blatchford's  Prize  Cases,  560). 

See  also  The  Venus  (1814)  (8  Cranch,  253);  The  Vowles 
(1814)  {ihid.,  348);  The  Francis  (1814)  {ibid.,  351);  Liv- 
ingston V.  Maryland  Ins.  Co.  (1813)  (7  Cranch,  542);  United 
States  V.  Guillem  (1859)  (11  How.,  50);  The  William  Bagaley 
(1866)  (5  Wall,  377);  Miller  v.  United  States  (1870) 
(II  Wall.,  268). 


INTRODUCTION  29 

(3)  ^^  general,  during  war,  contracts  with,  or  powers  of  at- 
torney or  agency  from,  the  enemy  executed  after  outbreak  of 
war  are  illegal  and  void;  contracts  entered  into  with  the  enemy 
prior  to  the  war  are  either  suspended  or  are  absolutely  terminated ; 
partnerships  with  an  enemy  are  dissolved;  powers  of  attorney 
from  the  enemy,  with  certain  exceptions,  lapse;  payments  to  the 
enemy  {except  to  agents  in  the  United  States  appointed  prior  to 
the  war  and  confirmed  since  the  war)  are  illegal  and  void;  all 
rights  of  an  enemy  to  sue  in  the  courts  are  suspended. 

The  William  Bagaley  (1866)  (5  Wall.,  377,  405,  407) : 

Public  war  duly  declared  or  recognized  as  such  by  the  lawmaking  power, 
imports  a  prohibition  by  the  sovereign  to  the  subjects  or  citizens  of  all  com- 
mercial intercourse  and  correspondence  with  citizens  or  persons  domiciled 
in  the  enemy  country. 

Hanger  v.  Abbott  (1867)  (6  Wall.,  532,  535) : 

War,  when  duly  declared  or  recognized  as  such  by  the  war-making  power, 
imports  a  prohibition  to  the  subjects  or  citizens  of  all  commercial  inter- 
course and  correspondence  with  citizens  or  persons  domiciled  in  the  enemy 
country.  Upon  this  principle  of  public  law  it  is  the  established  rule  in  all 
commercial  nations  that  trading  with  the  enemy,  except  under  a  government 
license,  subjects  the  property  to  confiscation  or  to  capture  and  condemnation. 

Partnership  with  a  foreigner  is  dissolved  by  the  same  event  which  makes 
him  an  alien  enemy.  .  .  .  Direct  consequence  of  the  rule  as  established  in 
those  cases  is  that  as  soon  as  war  is  commenced  all  trading,  negotiation, 
communication  and  intercourse  between  the  citizens  of  one  of  the  belliger- 
ents with  those  of  the  other  without  the  permission  of  the  government  is 
unlawful.  No  valid  contract,  therefore,  can  be  made,  nor  can  any  promise 
arise  by  implication  of  law,  from  any  transaction  with  an  enemy.  Excep- 
tions to  the  rule  are  not  admitted ;  and  even  after  the  war  has  terminated 
the  defendant,  in  an  action  founded  upon  a  contract  made  in  violation  of 
that  prohibition,  may  set  up  the  illegality  of  the  transaction  as  a  defense. 
Various  attempts,  says  Mr.  Wheaton,  have  been  made  to  evade  the  opera- 
tion of  the  rule  and  to  escape  its  penalties,  but  they  have  all  been  defeated 
by  its  inflexible  rigor. 

Coppell  V.  Hall  (1868)  (7  Wall.,  542,  554,  556,  558) : 

When  international  wars  exist  all  commerce  between  the  countries  of  the 
belligerents,  unless  permitted,  is  contrary  to  public  policy,  and  all  contracts 
growing  out  of  such  commerce  are  illegal.     Such  wars  are  regarded  not  as 


30  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

wars  of  the  governments  only,  but  of  all  the  inhabitants  of  their  respective 
countries.  The  sovereign  may  license  trade,  but  in  so  far  as  it  is  done  it 
is  a  suspension  of  war  and  a  return  to  the  condition  of  peace.  It  is  said 
there  can  not  be,  at  the  same  time,  war  for  arms  and  peace  for  commerce. 
The  sanction  of  the  sovereign  is  indispensable  for  trade.  A  state  of  war 
ipso  facto  forbids  it.  The  government  only  can  relax  the  rigor  of  the 
rule.  .   .   . 

The  payment  of  money  by  a  subject  of  one  of  the  belligerents,  in  the 
country  of  another,  is  condemned,  and  all  contracts  and  securities  looking 
to  that  end  are  illegal  and  void.  .   .   . 

In  Griswold  V.  Waddington  (i6  Johnson,  459,  460),  Kent,  C.  J.,  said: 
"  The  law  had  put  the  sting  of  disability  into  every  kind  of  voluntary  com- 
munication and  contract  with  an  enemy  which  is  made  without  the  special 
permission  of  the  government.  There  is  wisdom  and  policy,  patriotism  and 
safety  in  this  principle,  and  every  relaxation  of  it  tends  to  corrupt  the 
allegiance  of  the  subject  and  to  prolong  the  calamities  of  war." 

Miller  v.  United  States  (1870)  (11  Wall.,  268,  305,  306)  : 

It  is  immaterial  to  it  whether  the  owner  be  an  alien  or  a  friend,  or  even 
a  citizen  or  subject  of  the  power  that  attempts  to  appropriate  the  property. 
In  either  case  the  property  may  be  liable  to  confiscation  under  the  rules  of 
war.  It  is  certainly  enough  to  warrant  the  exercise  of  this  belligerent  right 
that  the  owner  be  a  resident  of  the  enemy's  country,  no  matter  what  his 
nationality.  The  whole  doctrine  of  confiscation  is  built  upon  the  foundation 
that  it  is  an  instrument  of  coercion,  which,  by  depriving  an  enemy  of  prop- 
erty within  reach  of  his  power,  whether  within  his  territory  or  without  it, 
impairs  his  ability  to  resist  the  confiscating  government,  while  at  the  same 
time  it  furnishes  to  that  government  means  for  carrying  on  the  war.  Hence 
any  property  which  the  enemy  can  use,  either  by  actual  appropriation  or  by 
the  exercise  of  control  over  its  owner,  or  which  the  adherents  of  the  enemy 
have  the  power  of  devoting  to  the  enemy's  use,  is  a  proper  subject  of  con- 
fiscation. 


United  States  v.  Lapene  (1873)  (i?  Wall.,  601,  602)  : 

All  commercial  contracts  with  the  subjects  or  in  the  territory  of  the 
enemy,  whether  made  directly  by  one  in  person  or  indirectly  through  an 
agent  who  is  neutral,  are  illegal  and  void.  .  .  .  No  property  passes  and  no 
rights  are  acquired  under  such  contracts. 

And  see  also  Mrs.  Alexander's  Cotton  (1864)  (2  Wall,  404)  ; 
The  Ouachita  Cotton  (1867)  (i  Wall.,  521);  United  States  v. 
Lane   (1868)    (8  Wall.,   185,   195);   Dean  v.   Nelson   (1869) 


INTRODUCTION  3 I 

(id  Wall.,  158);  Lasere  v.  Rochereau  (1873)  (17  Wall,  437); 
Day  V.  Micou  (1873)  (18  Wall,  156) ;  Mitchell  v.  United  States 
(1874)  (21  Wall,  350);  Fretz  v.  Stover  (1874)  (22  Wall, 
198);  Mathews  v.  McStea  (1870)  (91  U.S.,  7,  9,  10); 
Desmare  v.  United  States  (1876)  (93  U.S.,  605,  612) ;  Pike  v. 
Wassell  (1876)  (94  U.S.,  711);  Conrad  v.  Waples  (1877) 
(96  U.S.,  279,  286) ;  Burbank  v.  Conrad  ( 1877)  (96  U.S.,  291 ) ; 
United  States  v.  Pacific  R.R.  (1887)  (120  U.S.,  227,  233); 
Briggs  V.  United  States  (1892)  (143  U.S.,  346,  353);  Nelson, 
J.,  dissenting  in  Prize  Cases  (1862)  (2  Black,  635,  687). 
See  also  Kershaw  v.  Kelsey  (1868)  (100  Mass.,  561,  672). 

(4)  Effect  of  war  on  contracts  previously  entered  into  with 
the  enemy. 

Hanger  v.  Abbott  (1867)  (6  Wall,  532,  536) : 

Executory  contracts  also  with  an  alien  enemy,  or  even  with  a  neutral,  if 
they  can  not  be  performed  except  in  the  way  of  commercial  intercourse  with 
the  enemy,  are  dissolved  by  the  declaration  of  war,  which  operates  for  that 
purpose  with  a  force  equivalent  to  an  act  of  Congress. 

In  former  times  the  right  to  confiscate  debts  was  admitted  as  an  acknowl- 
edged doctrine  of  the  law  of  nations,  and  in  strictness  it  may  still  be  said  to 
exist,  but  it  may  well  be  considered  as  a  naked  and  impolitic  right,  con- 
demned by  the  enlightened  conscience  and  judgment  of  modern  times.  Bet- 
ter opinion  is  that  executed  contracts,  such  as  the  debt  in  this  case,  although 
existing  prior  to  the  war,  are  not  annulled  or  extinguished,  but  the  remedy 
is  only  suspended,  which  is  a  necessary  conclusion,  on  account  of  the 
inability  of  an  alien  enemy  to  sue  or  to  sustain,  in  the  language  of  the 
civilians,  a  persona  standi  in  judicio. 

What  contracts  are  merely  suspended  and  what  are  terminated 
by  a  state  of  war  is  considered  in  New  York  Ins.  Co.  v.  Statham 
(1876)  (93  U.S.,  24,  31,  32,  33,  35) : 

The  case,  therefore,  is  one  in  which  time  is  material  and  of  the  essence 
of  the  contract.  .    .   . 

But  the  court  below  bases  its  decision  on  the  assumption  that,  when  per- 
formance of  the  condition  becomes  illegal  in  consequence  of  the  prevalence 
of  public  war,  it  is  excused,  and  forfeiture  does  not  ensue.  It  supposes  the 
contract  to  have  been  suspended  during  the  war,  and  to  have  revived  with 
all  its  force  when  the  war  ended.    Such  a  suspension  and  revival  do  take 


32  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

place  in  the  case  of  ordinary  debts.  But  have  they  ever  been  known  to 
take  place  in  the  case  of  executory  contracts  in  which  time  is  material?  .    .    . 

The  truth  is  that  the  doctrine  of  the  revival  of  contracts  suspended  during 
the  war  is  one  based  on  considerations  of  equity  and  justice,  and  can  not  be 
invoked  to  revive  a  contract  which  it  would  be  unjust  or  inequitable  to 
revive. 

In  the  case  of  life  insurance,  besides  the  materiality  of  time  in  the  per- 
formance of  the  contract,  another  strong  reason  exists  why  the  policy  should 
not  be  revived.  The  parties  do  not  stand  on  equal  ground  in  reference  to 
such  a  revival.     It  would  operate  most  unjustly  against  the  company.  .   .   . 

We  are  of  opinion,  therefore,  that  an  action  can  not  be  maintained  for  the 
amount  assured  on  a  policy  of  life  insurance  forfeited,  like  those  in  ques- 
tion, by  nonpayment  of  the  premium,  even  though  the  payment  was  pre- 
vented by  the  existence  of  the  war.  .   .   . 

.  .  .  Failure  being  caused  by  a  public  war,  without  the  fault  of  the 
assured,  they  are  entitled  ex  aequito  et  bono  to  recover  the  equitable  value 
of  the  policies  with  interest  from  the  close  of  the  war.  ». 

The  William  Bagaley  (1866)  (5  Wall.,  377,  407)  : 

.  .  .  Executory  contracts  with  an  alien  enemy,  or  even  with  a  neutral,  if 
they  can  not  be  performed  except  in  the  way  of  commercial  intercourse  with 
the  enemy,  are  ipso  facto  dissolved  by  the  declaration  of  war,  which  operates 
to  that  end  and  for  that  purpose  with  a  force  equivalent  to  that  of  an  act 
of  Congress. 

See  also  Gates  v.  Goodloe  (1879)  (loi  U.S.,  612,  619-621); 
Lamar  v.  Micou  (1884)  (112  U.S.,  452,  464);  United  States  v. 
Dietrich  (1908)  (126  Fed.,  671,  674). 

See  also  Griswold  v.  Waddington  (1819)  (10  Johns,  438); 
Abell  V.  Insurance  Co.  (1881)  (18  W.  Va.,  406,  438);  Moore's 
Digest  of  International  Law,  vol.  x,  p.  244. 

(5)  As  to  the  effect  of  war  on  payment  of  interest. 

See  Trotter  on  Contract  During  War,  p.  49;  Supplement, 
p.  61. 

See  also  Brown  v.  Hiatts  (1872)  (15  Wall.,  177,  185); 
Hoare  v.  Allen  (1789)  (2  Dallas,  102);  Foxcroft  v,  Nagle 
(1791)  (2  Dallas,  182);  Conn.  v.  Penn.  (1818)  (i  Peters  C.  C, 
496,  524) :  Ward  v.  Smith  (1868)  (7  Wall.,  447,  452);  Moore, 
Dig.  Int.  Law,  vol.  vii,  p.  252. 


INTRODUCTION  33 

(6)  As  to  the  effect  of  war  on  payment  to  agents  of  the 
enemy,  and  upon  appointment  of  agents,  and  upon  acts  performed 
under  pozver  of  attorney  granted  by  the  enemy  prior  to  war. 

Conn.  V.  Penn.  (1818,  Cir.  Ct.  Penn.)  (i  Peters,  496,  527, 
528);  United  States  v.  Grossmeyer  (1869)  (9  Wall,  72, 
73);  Ward  V.  Smith  (1868)  (7  Wall,  447);  University  v. 
Finch  (1873)  (18  Wall,  106)  ;  Insurance  Co.  v.  Davis  (1877) 
(95  U.S.,  425,  429)  ;  Williams  v.  Paine  (1897)  (169  U.S.,  55, 
70,71). 

(7)  As  to  the  power  to  sue  in  the  courts. 

See  Hanger  v.  Abbott  (1867)  (6  Wall,  532,  536,  542); 
Caperton  v.  Bowyer  (1871)  (14  Wall,  216,  236);  Masterson  v. 
Howard  (1873)   (18  Wall,  99,  105). 

An  alien  enemy  may  be  sued  in  the  courts  of  the  United  States, 
though  he  has  no  right  to  sue.  McVeigh  v.  United  States  ( 1870) 
(11  Wall,  259);  University  v.  Finch  (1873)  (18  Wall,  106, 
III). 

(8)  As  to  power  of  the  government  to  license  trade  with  the 
enemy. 

See  especially  United  States  v.  Lane  (1868)  (8  Wall,  185, 
195)  ;  Hamilton  v.  Dillin  (1874)  (21  Wall,  y^,,  97)  : 

.  .  ^ .  The  power  of  the  government  to  impose  such  conditions  upon  com- 
mercial intercourse  with  an  enemy  in  time  of  war  as  it  sees  fit  is  undoubted. 
It  is  a  power  which  every  other  government  in  the  world  claims  and  exer- 
cises and  which  belongs  to  the  Government  of  the  United  States  as  incident 
to  the  power  to  declare  war  and  to  carry  it  to  a  successful  termination. 

(9)  As  to  effect  of  war  on  statutes  of  limitation. 

See  Stewart  v.  Kahn  ( 1870)  (11  Wall,  493) ;  United  States  v. 
Wiley  (1870)  (II  Wall,  508) ;  The  Protector  (1869)  (9  Wall, 
687) ;  Hanger  v.  Abbott  (1867)  (6  Wall,  532). 

(10)  As  to  rights  of  alien  enemies  resident  in  the  United 
States. 


34  •    EFFECTS    OF    THE    WAR    UPON    INSURANCE 

See  Clarke  v.  Morey  (1813)  (10  Johns,  69);  Seymour  v. 
Bailey  (1872)  (6'6  III,  288);  Princess  v.  Moffett  (19 14) 
W.N.,  379);  Volkil  V.  Governors  (1914)  (2  I.R.,  542);  For- 
restier  v.  Bordman  (1839)  (i  Story,  43);  Hallet  v.  Jenks 
(1805)  (3  Cranch,  210);  Brown  v.  United  States  (1814) 
(8  Cranch,  210) ;  Case  of  Fries  (1799)  (9  Fed.  Cases  No.  5126, 
pp.  830-832);  Lockington  v.  Smith  (18 19)  (i  Peters  Cir.  Ct, 
466,  472);  in  re  Lockington,  Brightly,  N.  Dak.  (Pa.),  269; 
Revised  Statutes,  Sections  4067-4070;  President's  Proclamation 
of  April  6,  1 91 7,  as  to  alien  enemies. 

English  Cases  during  the  Present  European  War 

A.  How  far  under  the  English  law  English  corporations  con- 
trolled by  German  stockholders  are  to  be  regarded  as  enemy. 

Amorduct  Manufacturing  Co.  v.  Debries  &  Co.  (84  L.J. 
(K.B.),  586;  112  L.T.,  131;  31  T.L.R.,  69;  59  S.J.,  91); 
Rubber  Co.  v.  Daimler  Co.  (C.A.  (1915)  i  K.B.,  893;  84  L.J. 
(K.B.),  926;  20  Com.  Cas.,  209;  (1915)  W.N.,  44;  59  S.J., 
232);  Daimler  Co.  v.  The  Continental  Tire  &  Rubber  Co. 
(H.L.  (E.),  (1916)  2  A.C.,  307;  85  L.J.  (K.B.),  1333; 
114  L.T.,  1049;  (1916)  W.N.,  269;  22  Com.  Cas.,  32; 
32  T.L.R.,  624;  60  S.J.,  602)  ;  in  re  Hilches  ex  parte  Muhesa 
Rubber  Plantations  (Ltd.)  (C.A.  (1917)  i  K.B.,  48;  86  L.J. 
(K.B.),  204;  (1916)  H.B.R.,  160;  115  L.T.,  490;  33  T.L.R., 
28).  See  also  Societe  Anonyme  Beige  des  Mines  d'Alijustrel  v. 
Anglo-Belgian  Agency  (July  30,  1915)  (31  T.L.R.,  624). 

B.  What  constitutes  trading  zvith  the  enemy? 

Moss  V.  Donohoe  (J.C.  32  T.L.R.,  343).  It  is  trading  with 
the  enemy  to  order  from  an  American  company  with  a  branch  in 
Rotterdam  gin  which  the  defendant  knew  was  sent  by  such 
branch  to  Hamburg,  Germany,  for  bottling. 

The  Panariellos  (85  L.J.  (P.),  112;  114  L.T.,  670;  32  T.L.R., 
459;  60  S.J.,  427).  A  British  subject  dispatched  goods  after 
the  outbreak  of  war  and  with  knowledge  of  it  from  a  foreign 


INTRODUCTION  35 

port  for  delivery  as  directed  by  an  enemy  firm  and  for  their 
benefit. 

Held,  that  this  constituted  trading  with  the  enemy  and  the 
goods  were  forfeit. 

Stephen  M.  Weld  &  Co.  v.  Fruhling  Goshen  (1916)  (W.N., 
187;  32  T.L.R.,  469).  The  plaintiffs  were  partners  in  a  German 
firm  and  a  draft  for  a  part  of  the  profits  of  the  German  firm 
was  dravvn  and  accepted  before  war  began  by  the  defendants. 
The  draft  was  paid  over  to  the  plaintiffs,  an  American  firm,  after 
war  was  declared  and  the  defendants  refused  payment. 

Judgment  for  the  defendants,  it  being  a  transfer  on  behalf 
of  an  enemy. 

In  re  Aramayo  Francke  Mines  (Ltd.)  (C.A.  (1917)  i  Ch., 
451;  86  L.J.  (Ch.),  225;  116  L.T.,  54;  (1917)  W.N.,  36; 
33  T.L.R.,  176).  When  a  corporation  incorporated  in  England 
and  doing  business  in  Bolivia  for  the  benefit  of  the  Allies 
attempts,  in  order  to  avoid  taxes,  to  transfer  the  assets  to  a 
corporation  incorporated  in  Switzerland,  the  court  held  that  an 
order  should  be  made  appointing  a  controller  under  the  Trading 
with  the  Enemy  Act  to  prohibit  that  action. 

C.  What  constitutes  trading  for  the  benefit  of  the  enemy? 
Rex  V.  Kupfer  (1915)   (2  K.B.,  321).     Kupfer  in  England 

made  payments  to  an  English  bank  to  be  transmitted  to  a  Dutch 
house  to  which  it  was  proved  Kupfer  had  been  indebted  before 
the  war. 

Held,  this  was  a  payment  for  the  benefit  of  the  enemy. 

D.  Trading  with  branches  of  enemy  concerns  in  Allied  ter- 
ritory. 

Wolf  V.  Carr,  Parker  &  Co.  (April  29,  1915)  (31  T.L.R., 
407). 

E.  Contracts  of  insurance. 

W.  L.  Ingle  V.  Mannheim  Insurance  Co.   (1915)    (i  K.B., 


36  EFFECTS   OF   THE   WAR   UPON   INSURANCE 

227;  84  L.J.  (K.B.),49i;  112  L.T.,  510).  A  suit  may  be  main- 
tained against  a  branch  of  an  alien  enemy  insurance  company 
situated  in  England  on  a  policy  issued  before  the  war.  The 
loss  occurred  subsequently  and  a  claim  to  recover  such  a  loss  is 
not  a  "  transaction  with  the  enemy." 

F.  Appointment  of  a  custodian  and  distribution  of  the  assets 
and  details  of  administration  under  the  peculiar  provisions  of 
the  English  Trading  with  the  Enemy  Act. 

Stevenson  &  Sons  (Ltd.)  v.  Aktiengesellschaft  (C.A.  115 
L.T.,  594;  33  T.L.R.,  84;  C.A.  (1917)  i  K.B.,  842;  32  T.L.R., 
84;  61  S.J.,  146).  The  plaintiffs,  an  English  company,  were, 
at  the  outbreak  of  the  war  between  England  and  Germany,  sole 
agents  in  England  for  the  defendants,  a  German  company. 
There  was  also  a  partnership  relation  between  the  two. 

Held,  that  both  agency  and  partnership  were  terminated  at 
the  outbreak  of  war,  and  that  the  determination  as  to  what  should 
be  done  with  that  portion  of  the  plaintiff's  assets  which  should 
belong  to  the  German  partners  was  one  for  Parliament  to 
determine. 

On  appeal,  held,  that  lower  court  was  right  in  regard  to  the 
agency  and  partnership  and  that  the  enemy  partner  was  entitled 
to  a  share  of  the  profits  made  after  the  dissolution  by  the  En- 
glish corporation  carrying  on  the  business  with,  the  aid  of  the 
enemy  partners'  capital. 

In  re  Kastner  &  Co.,  Auto-Piano  Co.  v.  Kastner  &  Co.  (191 7) 
(I  Ch.,  390;  86  L.J.  (Ch.),  235;  116  L.T.,  62;  (1917)  W.N., 
15  ;  33  T.L.R.,  149).  Schmidtz  v.  Van  der  Veen  &  Co.  '(84  L.J. 
(K.B.),  861;  112  L.T.,  991;  31  T.L.R.,  214).  In  re  W.  Hagel- 
berg  Aktiengesellschaft  (1916),  2  Ch.,  503;  (1916)  W.N., 
335.  In  re  Fried  Krupp  Atkien-Gesellschaft,  (1916)  2  Ch., 
194;  114  L.T.,  1026;  (1916)  W.N.,  234;  32  T.L.R.,  553; 
(1917)  W.N.,  171. 

(a)  Right  of  a  custodian  of  a  corporation  to  vote  the  shares. 

In  re  R.  Pharaon  et  Fils,  C.A. ;   (1916)    i  Ch.,   i;  85  L.J. 


INTRODUCTION  37 

(Ch.),  68;  (1915)  H.B.R.,  232;  113  L.T.,  1138;  (1915)  W.N., 
340;  32  T.L.R.,  47. 

A  custodian  in  whom  are  vested  shares  in  an  English  company, 
formerly  belonging  to  an  enemy,  may  vote  the  shares  as  if  he 
was  himself  the  stockholder. 

(b)  Right  of  alien  enemy  to  vote  his  shares. 

Robson  V.  Premier  Oil  &  Pipe  Line  Co.,  C.A.  (1915),  2  Ch., 
124;  84  L.J.  (Ch.),  629;  118  L.T.,  523. 

G.  During  a  state  of  war  an  alien  enemy  may  not  vote  shares 
held  in  English  company,  but  right  of  voting  is  stispended  until 
after  war. 

(a)  Right  of  alien  enemy  to  sue  and  be  sued. 

Mercedes  Daimler  Motor  Co.  v.  Maudsley  Motor  Co.  (32 
R.P.C.,  149;  (1915)  W.N.,  54;  31  T.L.R.,  178). 

Two  companies  sued  as  co-plaintiffs  for  patent  infringement. 
Agreement  between  them  provided  British  company  had  sole 
right  to  sue  for  infringement  and  could  join  alien  enemy  as 
co-plaintiff  on  certain  notice. 

Held,  will  of  the  alien  enemy  not  relevant,  and  British  com- 
pany had  right  to  sue  alone. 

Turn  &  Taxis  v.  Moffett  (191 5)  (i  Ch.,  58;  84  L.  J.  (Ch.), 
220;  112  L.T.,  114). 

An  alien  enemy's  wife  residing  and  duly  registered  in  England 
may  sue  upon  her  individual  rights. 

Halsey  et  al.  v.  Lowenfield  (1915)  (W.N.,  400;  32  T.L.R.,  i). 

Held,  that  an  action  might  be  brought  against  an  alien  enemy 
on  a  lease  for  rent  occurring  after  commencement  of  war. 

Vokl  V.  Governors  (1914)  (2L.R.,  543) ;  Porter  v.  Frienden- 
berg  et  al.,  C.A.  (1915)  (i  K.B.,  857;  84  L.J.  (K.B.),  looi; 
20  Com.  Cas.,  189). 

Alien  enemy  can  not  sue  unless  within  the  realm  of  license  of 
the  King.    He  may  be  sued  in  the  King's  courts. 

J.  B.  Rombach  Baden  Clock  Co.  v.  Gent  &  Son  (84  L.J. 
(K.B.),  i558;3iT.L.R.,492). 


^8  EFFECTS    OF   THE   WAR   UPON   INSURANCE 

On  dissolution  of  a  partnership  in  England  between  a  nat- 
uralized British  subject  and  alien  enemies,  the  former  being 
appointed  receiver,  it  was  held  the  latter  could  sue  for  partner- 
ship debts  which  defendants  could  not  withhold  as  payments  to 
the  enemy.  Ejv  parte  Boussmacher  (1806)  (13  Ves.,  71),  and 
Mercedes  Daimler  Motor  Co.  v.  Mandslay  Motor  Co.  (191 5) 
(31  T.L.R.)  followed. 

(b)  Stay  of  suit  due  to  outbreak  of  war. 

Robinson  &  Co,  v.  Mannheim  Continental  Insurance  Co. 
(1915)  (i  K.B.,  155;  84  L.J.  (K.B.),  238;  20  Com.  Cas.,  125); 
in  re  Mary,  Duchess  of  Sutherland,  et  al.  v.  Burna  et  al.  (C.A., 
31  L.T.R.,  394).  Commencement  of  war  does  not  give  right  to 
have  action  stayed  when  brought  before  by  British  *^  plaintiffs 
against  a  German  insurance  company. 

H.  Agency. 

Tingley  V.  Muller  (C.A.  (1917),  W.N.,  180;  116  L.T.,  482; 
33  T.L.R.,  369;  61  S.J.,  478).  A  contract  for  the  sale  of  land 
was  entered  into  between  an  English  purchaser  and  a  German 
resident  in  England  and  a  deposit  paid.  The  vendor  left  for 
Germany,  becoming  an  alien  enemy,  but  left  a  power  of  attorney 
in  an  English  solicitor  to  complete  the  sale.  Held,  that  the  power 
of  attorney  was  not  revoked  by  the  vendor  becoming  an  alien 
enemy. 

Maxwell  v.  Grunhert  (C.A.,  31;  T.L.R.,  79).  An  agent  in 
England  of  an  alien  enemy  principal  is  not  entitled  to  bring  an 
action  for  a  decree  that  he  is  entitled  to  called  debts  and  for 
appointment  of  a  receiver. 

I.  Goods,  wares  and  merchandise. 

King  V.  Oppenheimer  (1915)  (2  K.B.,  755).  Held,  that  cer- 
tain transfers  made  from  lithograph  stones  in  Germany  were 
goods,  wares  and  merchandise. 

J.  Enemy  property. 

In  re  Bankfur  Handel  &  Co.   (1915)   (i  Ch.,  848;  84  L.J. 


INTRODUCTION  39 

(Ch.),  435;  113  L.T.,  228).  A  debtor  to  an  alien  enemy  is  not 
a  person  who  holds  or  manages  for  or  on  behalf  of  an  enemy 
any  property. 

K.    Contracts  of  Allied  subjects. 

Kreglinger  &  Co.  v.  Cohen  &  Co.  (21  T.L.R.,  592);  Wolf  & 
Sons  V.  Carr  et  al.  (C.A.  (1915),  W.N.,  195;  31  T.L.R.,  407). 
Held,  that  plaintiffs,  Allied  subjects,  could  not  sue  for  breach  of 
contract  made  before  the  war  with  persons  who  became  alien 
enemies  at  outbreak  of  war  and  repudiated  such  contracts,  as 
same  became  illegal  at  outbreak  of  war. 

Germany  and  the  other  nations  at  war  have  enacted  similar 
trading  with  enemy  acts  which  regulate  the  business  of  insur- 
ance between  their  subjects  and  enemies.  Under  the  law  of 
August  4,  19 14,  the  Federal  Council  of  Germany  passed  an 
ordinance  under  date  of  September  4,  19 14,  which  regulated 
foreign  business  undertakings.  The  business  of  enemy  insurance 
companies  and  banks  passed  under  the  control  of  supervisors, 
appointed  by  the  government.  The  money  received  or  due  such 
companies  was  not  permitted  to  be  sent  out  of  the  country,  but 
was  deposited  to  the  credit  of  the  concern  in  the  Reichsbank. 
But  the  property  and  other  private  rights  of  foreign  companies 
was  not  to  be  affected  under  the  law. 

It  will  be  observed  that  the  legislation  or  regulation  by  other 
means  which  in  the  leading  nations  at  war  was  at  first  adopted, 
was  very  liberal,  but  that  in  most  countries  with  the  development 
of  events  there  has  come  to  be  adopted  more  stringent  regula- 
tions. What  future  events  may  bring  is  uncertain,  but  so  far  it 
is  to  be  noted  that  there  has  been  no  extensive  movement  or 
tendency  to  confiscate  the  property  of  the  enemy.  It  is  yet 
assumed  that  in  the  event  of  dire  necessity  under  which  enemy 
property  would  be  taken,  compensation  will  be  made.  To 
what  extent  this  tendency  may  be  credited  to  a  desire  to  observe 
the  principles  of  justice  as  they  have  found  or  sought  expression 
in  international  law,  and  to  what  extent  to  the  fact  that  each 


40  EFFECTS    OF   THE    WAR    UPON    INSURANCE 

of  the  great  warring  nations  has  large  amounts  of  property 
under  the  jurisdiction  of  the  enemy,  it  is  impossible  to  state. 
It  may  well  be  that  confiscation  of  English  property  in  Germany, 
or  of  German  property  in  England,  would  not  bring  to  either 
party  so  much  real  gain  as  an  observance  of  the  property  rights 
of  enemies. 

MORATORIA  AND  INSURANCE 

Another  general  effect  which  the  war  has  had  on  insurance 
is  the  actual  or  proposed  application  of  the  moratoria  principles 
to  the  business. 

This  has  taken  two  forms:  first,  the  enactment  of  legislation 
which  prevented  the  lapsing  of  the  policy  in  the  event  the  premium 
was  not  paid  as  promptly  as  was  required  in  the  terms  of  the 
contract.  This  practice  is  sufficiently  indicated  by  a  description 
of  the  method  which  was  followed  in  France. 

In  France,  as  in  all  the  belligerent  countries  of  Europe,  the  outbreak  of 
the  war  was  speedily  followed  by  moratoria  of  a  more  or  less  sweeping  kind. 
The  primary  object  of  these  moratoria  was,  of  course,  to  protect  citizens 
called  en  masse  to  the  colors,  and  their  families,  from  immediate  ruin  or 
acute  distress  occasioned  by  their  inability  under  the  circumstances  to  meet 
promptly  their  debts,  contractual  payments  like  rents,  and  morally  or  finan- 
cially compulsive  obligations  like  life  insurance  premiums.  The  French 
authorities  perceived  that  the  apphcation  of  the  moratorium  can  not  properly 
be  one-sided,  i.e.,  can  not  without  working  serious  harms  be  confined  to  one 
set  of  persons  obligated  to  make  payments  to  another  set  of  persons  or 
institution,  but  must  be  extended  to  cover  in  part  at  least  the  payments  due 
from  the  second  set  to  the  first  or  to  still  other  parties. 

In  the  matter  of  the  moratorium  for  insurance  the  French  Government 
took  great  pains  to  protect  as  far  as  possible  the  interests  of  the  insurers 
as  well  as  those  of  the  insured.  In  the  earlier  period  of  the  war,  virtually 
all  classes  of  insurance  institutions  were  granted  either  complete  or  partial 
moratoria,  as  the  case  might  require.  Later,  as  the  outstanding  prewar  busi- 
ness of  the  indemnity  insurance  companies — fire,  marine,  accident,  liability, 
etc. — was  gradually  worked  off,  the  privilege  of  the  moratorium  with  respect 
to  payments  due  from  them  on  losses  incurred  in  the  parts  of  France  not 
occupied  by  the  enemy,  was  withdrawn.  For  the  life  insurance  companies, 
however,  and  for  the  somewhat  similarly  placed  thrift,  savings  and  building 
and  loan  associations,  the  moratorium  is  still  in  partial  effect  as  regards  pay- 
ments due  from  them  to  their  policyholders  (or  the  beneficiaries  of  policy- 
holders) and  members. 


INTRODUCTION  4 1 

The  present  status  of  the  moratorium  for  insurance  companies  and  for 
the  capitalization  or  savings  associations  just  referred  to,  is  shown  by  a  note 
in  a  recent  issue  of  the  French  insurance  journal,  L'Argus,  giving  the  facts 
as  to  new  prolongment  of  the  moratorium  period  for  ninety  days  from 
August  28,  1917.    This  note  is  as  follows: 

By  a  decree  of  August  28,  1917,  the  moratorium  granted  for  the  payments 
of  amounts  owed  by  French  insurance  companies,  capitalization  societies 
(thrift  associations)  and  savings  associations  has  been  extended  an  addi- 
tional ninety  days,  without  change.  During  the  period  of  this  postpone- 
ment of  payments  which  have  become  due  and  payable,  the  companies 
covered  by  this  decree  will  be  obliged  to  pay  as  follows : 

(i)  Life  insurance  companies:  Fifty  per  cent  of  the  face  value,  or  of  the 
stated  surrender  value  of  policies,  to  the  extent  of  25,000  francs,  and  the 
entirety  of  annuity  insurances. 

(2)  Workmen's  compensation  insurance  companies:  The  entirety  of  the 
temporary  allowances  and  annuities  or  pensions  owed  by  virtue  of  the  law 
of  April  9,  1898,  and  of  the  laws  which  have  modified  or  amplified  it. 

(3)  Other  accident  insurance  companies  of  all  kinds:  The  entirety  of  the 
temporary  indemnity  or  of  the  face  of  the  policy,  as  the  case  may  be,  or 
the  whole  of  the  other  indemnities  due. 

(4)  Fire  insurance  and  insurance  against  all  other  risks  than  those  pro- 
vided for  in  the  preceding  clauses :  The  entirety  of  the  losses. 

(5)  Capitalization  societies  (thrift  associations)  :  The  entirety  of  the 
amount  of  matured  bonds  and  certificates. 

Savings  societies,  but  only  in  so  far  as  the  societies  subject  to  Section  II 
of  the  Law  of  July  3,  1915,  are  concerned:  Fifty  per  cent  of  the  amounts 
falling  due  to  the  interested  parties  in  consequence  of  the  maturing  of  their 
series  or  participations,  or  in  consequence  of  death,  for  associations  whose 
investments  are  made  in  the  construction  of  houses,  payable  in  instalments ; 
and  the  totality  of  the  amounts  due,  for  the  other  societies  of  this  class. 

Where  the  policyholder  has  continued  to  reserve  the  right  to  avail  himself 
of  the  privilege  provided  by  Section  5  of  the  decree  of  August  lO-December 
IS,  1914,  the  benefit  of  the  provisions  of  the  preceding  clauses  can  not  be 
invoked  by  him  except  on  the  condition  that  the  amount  of  the  premium 
had  been  paid,  and  in  the  case  of  accident  and  fire  insurance,  that  the  state- 
ments of  wages  and  of  losses  have  been  made  comformable  to  the  require- 
ments of  the  policy. 

In  the  case  of  life  insurance,  the  insurance  company,  one  month  after  the 
dispatch  of  an  unanswered  registered  letter,  reproducing  the  text  of  the 
present  provision,  and  requesting  the  insured  to  pay  the  premiums  due,  or 
to  undertake  the  payments  in  one  or  more  instalments,  according  to  his 
choice,  in  the  period  of  two  years  after  the  war,  shall  not  be  responsible,  in 
case  of  the  death  of  the  insured,  except  to  the  extent  of  the  paid-up  value 
of  the  policy,  conformable  to  the  conditions  of  the  contract. 

The  provisions  of  the  preceding  clauses  are  not  applicable  in  the  case  of 
policyholders  actively  engaged  in  military  service,  residing  in  invaded  terri- 
tory, held  prisoners  in  enemy  territory,  or  engaged  in  public  service  outside 
of  France  or  Algeria.  The  collection  of  their  premiums  in  arrears  during 
the  period  in  which  they  were  covered  by  their  policies,  shall  be  made  accord- 
ing to  provisions  which  shall  be  determined  after  the  war  is  concluded. ' 

In  the  United  States  similar  legislation  was  proposed,  but  after 
passing  the  House  of  Representatives  and  being  discussed  in 

*  The  Economic  Worid,  n.  s.,  vol.  xiv,  No.  14,  P-  494- 


42  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

the  Senate,  further  consideration  was  postponed  to  the  regular 
congressional  session  of  1917,  when  such  a  law  was  passed. 

Another  modified  form  of  the  moratorium  principle  has  been 
suggested  and  actually  placed  in  operation,  with  respect  to 
dividends  on  policies.  This  phase'  of  the  moratorium  is  well 
described  as  follows :  ^ 

It  is  perhaps  not  going  too  far  to  say  that  the  more  life  underwriters  in 
the  United  States  study  the  financial  possibilities  for  their  companies  which 
the  war  with  Germany  may  involve — particularly  if  hostilities  are  prolonged 
for  any  such  period  as  most  of  our  military  men  seem  to  anticipate — the 
more  their  anxieties  are  aroused.  In  the  days  when  the  outbreak  of  the  war 
seemed  probable  and  in  the  earlier  weeks  of  the  war  itself,  the  general  dis- 
position was  to  look  at  the  function  of  life  insurance  from  a  patriotic  point 
of  view,  and  to  search  for  ways  and  means  of  liberality  towards  such  policy- 
holders as  might  be  called  upon  to  risk  their  lives  in  the  countr^^'s  service. 
There  was  abundant  talk,  even  in  life  insurance  circles  proper,  of  the 
propriety  and  indeed  obligation  of  the  utmost  possible  generosity  towards 
the  defenders  of  the  nation's  cause.  When  it  became  apparent  that  it  would 
never  do  to  accept  the  war  exposure  of  new  policyholders  within  the 
probable  military  age  limits  without  additional  premium  charges  to  cover 
the  risk,  and  when  the  consequent  discussion  of  war  risk  policy  clauses  began, 
the  almost  universal  effort  was  to  keep  these  clauses  as  liberal  as  possible 
and  to  charge  the  lowest  possible  additional  premium  rates  for  them.  This 
being  the  disposition  of  the  underwriters  themselves,  the  view  taken  of  the 
matter  by  persons  less  directly  charged  with  the  responsibility  of  the  safe 
administration  of  life  insurance — the  State  Insurance  Commissioners,  for 
instance,  as  well  as  not  a  few  voluntary  advisers  on  the  subject — was  still 
more  patriotic  and  still  less  conservative.  It  was  plainly  intimated  in  many 
directions  that  this  was  no  time  for  actuarial  meticulousness ;  the  thing  of 
supreme  importance  was  to  impose  no  appreciable  burden  upon  those  desir- 
ing to  protect  themselves  and  their  families  or  dependents  against  the  hazard 
of  war  through  life  insurance.  Suppose  the  extra  premium  should  prove 
to  be  not  quite  adequate  for  the  risk,  it  was  argued,  the  annual  dividend 
fund  of  the  policyholders  as  a  body  might  be  drawn  upon  to  a  moderate 
extent  to  make  good  the  difference;  for  any  policyholder  who  should  object 
to  some  lessening  of  his  annual  policy  dividends  on  this  account  would  be 
a  very  scurvy  kind  of  fellow,  so  deaf  to  the  call  of  patriotism  that  his  objec- 
tions might  properly  be  disregarded,  seeing  that  he  could  not  possibly  find 
standing  for  them  with  the  public  at  large.  In  fact,  this  manner  of  regard- 
ing the  question  was  carried  so  far  by  some  persons  that  they  advocated 
treating  all  the  dividend  accumulations  of  all  the  policyholders  of  the  life 
insurance  companies  as  a  kind  of  common  fund  allocated  to  the  payment  of 

'  The  Economic  World,  n.  s.,  vol.  xiv.  No.  7,  p.  236.-  Editorial  by  A.  R. 
Marsh. 


INTRODUCTION  43 

losses  due  to  the  war,  and  urged  strenuously  that  the  companies  should 
make  no  extra  charge  at  all  for  the  war  risk,  but  should  regard  themselves 
as  free,  in  the  general  interest  of  the  country,  to  dip  into  the  fund  just 
described  to  whatever  extent  it  might  be  necessary  to  do  so. 

It  is  true  that  in  the  United  States  lawmakers  and  others  prefer  to  think 
of  life  insurance  companies  in  terms  of  their  aggregate  resources,  con- 
venient for  filching  through  taxation  and  otherwise,  instead  of  in  terms  of 
the  multitudinous  policyholders  for  whom  the  resources  are  held  in  trust; 
but  even  so  no  general  support  could  be  found  for  a  scheme  to  engineer  a 
raid  in  the  name  of  patriotic  necessity  upon  the  annual  surpluses  accumu- 
lated by  the  companies  under  the  promise  of  distributing  these  surpluses  to 
the  policyholders  as  dividends  on  their  policies. 

In  the  light  of  the  latest  developments  in  connection  with  the  war  losses 
which  the  companies  will  probably  have  to  meet,  if  a  really  large  army  of 
American  troops  is  sent  to  Europe  before  peace  is  made,  the  earlier  dis- 
cussions and  proposals  with  respect  to  war  policy  clauses  and  war  risk 
premium  rates  seem  already  curiously  out  of  date  and  irrelevant.  For  as 
the  great  majority  of  American  life  insurance  companies  complete  the  com- 
pilation and  computation  of  their  war  exposure  on  policies  already  out- 
standing when  war  began — policies  containing  no  military  service  clause  at 
all — and  as  they  discover  what  the  actual  war  experience  of  life  companies 
in  other  belligerent  countries  has  been  and  continues  to  be,  the  pressing 
problem  for  them  ceases  altogether  to  be  that  of  the  limits  of  patriotic 
generosity,  and  becomes  that  of  making  sure  to  weather  the  storm  without 
financial  impairment.  It  is  by  reason  of  this  newly  discovered  uncomfort- 
able state  of  things  that  the  suggestion,  now  much  under  discussion  among 
life  underwriters,  has  been  made,  that  the  payment  of  all  dividends  on  par- 
ticipating life  policies  should  be  discontinued  for  the  period  of  the  war, 
i.e.,  that  a  kind  of  moratorium  should  be  established  for  such  dividends. 

It  is,  of  course,  impracticable  for  one  not  in  immediate  touch  with  the 
business,  not  merely  of  a  single  life  insurance  company  but  of  many,  to  pass 
a  competent  judgment  upon  the  necessity  of  the  expediency  of  such  a  mora- 
torium for  life  policy  dividends  as  has  just  been  described.  It  is  certain 
that  some  few  of  the  American  companies  are  under  no  necessity  of  adopt- 
ing this  procedure,  since  in  the  years  before  the  war  they  had  clung  to  the 
practice  of  inserting  war  service  clauses  in  all  their  policies,  and  thus  have 
not  now  to  face  war  losses  for  which  no  extra  premium  has  been  paid  or 
can  be  demanded.  Such  companies,  however,  are  undoubtedly  the  rare 
exceptions,  since  disbelief  in  the  possibility  of  a  really  serious  war  between 
the  United  States  and  any  other  nation  or  nations  has  been  so  general  among 
all  classes  of  our  business  men,  life  underwriters  included,  that  provision 
against  such  a  contingency  has  been  looked  upon  as  almost  ridiculous.  As 
for  the  companies  for  which  the  contingency  has  become  a  stern  reality,  it 
may  be  taken  as  certain  that  great  differences  exist  among  them  as  regards 
the  situation  they  now  have  to  meet.  Some  might  undoubtedly  rely  upon 
their  resources  to  carry  them  through  with  any  war  loss  ratio  they  could 
possibly  experience :  others  might  find  themselves  hard  pressed  in  a  long 
drawn  out  war. 


44  effects  of  the  war  upon  insurance 

Increase  of  Taxes 

Insurance  has  also  been  seriously  affected  by  the  increased 
taxation.  The  expenses  of  the  war  have  been  so  enormous  that 
the  governments  have  been  forced  to  use  almost  every  possible 
source  for  raising  revenue  without  very  scrupulous  regard  as  to 
whether  the  subject  of  taxation  was  a  proper  one  for  increased 
taxation.  Theoretical  considerations  and  principles  of  equity 
and  justice  in  taxation  have  either  given  way  or  been  modified 
by  the  practical  necessity  and  ability  to  secure  the  funds  for  the 
state.  The  insurance  business  in  most  of  its  branches  not  only 
had  on  hand  large  funds,  but  it  was  in  continual  process  of 
collecting  large  amounts.  These  funds  thus  appealed  to^the  hard 
pressed  legislator  as  an  easily  available  source  of  revenue,  not- 
withstanding that  these  large  accumulations,  in  many  branches 
of  insurance,  were  liabilities  and  not  assets;  that  is  to  state,  they 
were  reserve  funds,  held  under  the  terms  of  the  insurance  con- 
tract to  meet  financial  obligations  of  the  insurer.  The  extent 
and  character  of  these  increased  taxes  are  considered  elsewhere 
in  this  study. 

Public  Insurance 

One  of  the  most  interesting  effects  of  the  war  on  insurance  is 
the  establishment  of  government  insurance  of  several  kinds.  It 
is  too  early  to  deduce  any  conclusion  from  the  experience  under 
these  various  kinds  of  government  insurance,  but  it  may  well 
result  that  the  experiments  now  being  made  will  result  in  the 
permanent  establishment  and  extension  of  government  insur- 
ance. As  is  well  known  to  students  of  insurance,  dif- 
ferent kinds  of  public  insurance  had  been  in  operation  in 
various  countries.  In  Australia  government  life  insurance  had 
been  in  operation,  and  likewise  in  the  European  nations  several 
examples  of  government  property  insurance.  In  the  United 
States  there  had  been  a  trial  of  public  life  insurance  in  the  state 
of  Wisconsin.  These  examples,  taken  at  random,  show  that 
government  insurance  was  not  a  new  thing  at  the  outbreak  of 


INTRODUCTION  45 

the  war  and,  indeed,  in  many  of  the  nations  there  had  been 
a  growing  opinion  that  insurance  in  several  forms  afforded  a 
proper  activity  for  the  state.  The  new  hazards  which  the  war 
introduced  into  many  kinds  of  insurance,  the  resulting  increase 
in  the  risk,  and  the  impossibility  of  calculating  this  risk  made 
a  condition  from  which  many  of  the  private  insurance  organ- 
izations were  glad  to  be  relieved.  It  was  but  natural  and  proper 
that  the  state  should  be  called  upon  to  carry  these  new  and 
unpredictable  risks.  Hence  the  state  became  the  insurer,  taking 
on  a  function  which  in  times  of  peace  would  have  been  strongly 
opposed  by  the  private  insurance  organizations.  It  is  assumed 
probably  by  the  majority  of  legislators  and  the  people  at  large, 
that  this  assumption  by  the  state  of  insurance  will  be  an  activity 
to  be  discontinued  at  the  close  of  the  war.  But  several  con- 
siderations may  work  against  the  achievement  of  this  end.  In 
the  first  place,  the  insurance  contract  in  many  of  its  forms  is 
one  which  either  creates  obligations  extending  to  a  distant  date 
of  maturity,  or  if  not  directly  doing  this,  it  creates  a  moral 
obligation  to  continue  the  contract. 

In  the  second  place,  public  insurance  was  gaining  supporters 
before  the  war,  and  if  the  experiment  should  appear  to  be  suc- 
cessful, there  may  result  such  a  demand  that  the  governments 
which  have  gone  into  the  insurance  business  may  be  forced  to 
continue  it.  This  may  be  done  in  competition  with  private  com- 
panies, or  the  state  may  do  as  Italy  did  some  years  since,  make 
of  life  insurance,  or  other  forms  of  insurance,  a  monopoly. 


II 

THE  EFFECT  OF  THE  WAR  ON  LIFE 
INSURANCE 

The  present  war  is  doing  more  to  bring  to  the  attention  of 
people  an  appreciation  of  what  life  insurance  is  than  all  the 
educational  activities  of  many  years.  Protection  for  the  family 
or  dependents  has  become  an  actual,  present  problem  for  many, 
and  a  realization  that  the  institution  of  life  insurance  is  the  only 
possible  agency  to  secure  this  end  has  resulted.  Individual  and 
competitive  life  has  given  way,  for  the  time  being,  to  collective 
mass  conduct,  and  therefore  the  cooperative,  mutual,  character- 
istic of  life  insurance  finds  a  wide  opportunity  for  use.  Indeed, 
so  great  is  the  need  for  the  wide  application  of  the  insurance 
principle  to  equal  the  correspondingly  broad  cooperation  of  social 
groups,  united  to  achieve  a  single  purpose,  that  the  existing 
agencies  for  the  operation  of  the  insurance  principle — private 
insurance  organizations — have  been  found  inadequate  to  meet 
the  situation.  There  has,  therefore,  resulted  the  use  of  that  most 
inclusive  agency  known  to  society — government — which  in  dif- 
ferent ways  has  assumed  for  the  time  being  the  function  of 
granting  insurance  of  various  kinds. 

Status  of  Life  Insurance  before  the  War 

It  has  been  shown  how  and  why  insurance  was  becoming  more 
popular  in  the  period  preceding  the  war,  and  how  in  its  various 
forms  it  was  becoming  increasingly  used  to  meet  the  needs  of 
society.  This  increase  in  the  use  of  insurance  was  due  in  part 
to  the  fact  that  it  was  becoming  more  scientific  and  in  part  to 
a  bette-  understanding  and  appreciation  of  insurance.    The  need 

46 


EFFECT  ON  LIFE  INSURANCE  47 

or  demand  for  insurance  was  a  result  of  the  fact  that  society, 
both  in  its  individual  and  group  activities,  was  becoming  more 
interdependent.  However  social  progress  may  be  characterized, 
and  whether  there  is  any  agreement  as  to  what  constitutes  social 
progress,  it  is  undoubtedly  true  that  the  past  century  has  wit- 
nessed what  Herbert  Spencer  has  described  as  an  increased 
homogeneity,  accompanied  by  an  increased  heterogeneity.  The 
isolation  of  interests  and  the  individual  economic  and  social 
conduct  have  given  way  to  a  growing  community  of  interests 
of  an  increased  number  of  groups  and  a  greater  unity  of  interests. 
Life  insurance  has  therefore  found  an  unusual  field  of  service 
in  this  developing  community  of  interests,  and  has  therefore 
increased  in  all  the  leading  nations  in  volume  and  in  individual 
policies.  The  following  table  shows  the  amount  of  life  insurance 
in  force  in  some  of  the  leading  nations  at  the  close  of  the  year 
1916: 

Country 

United  States  . 

Great   Britain    

Germany  

France  

Japan    

Russia    

Canada    

Statistics  are  not  available  to  determine  the  number  of  single 
persons  who  hold  life  insurance  policies.  There  were  in  the 
United  States  in  1916  over  ten  million  ordinary  life  policies 
in  force  in  the  regular  life  and  industrial  companies.  This  does 
not  include  the  large  number  of  policies  in  fraternal  and  assess- 
ment companies,  nor  does  it  take  into  account  the  fact  that  many 
persons  hold  more  than  one  policy  of  life  insurance. 

The  life  insurance  companies  of  the  United  States  have  not 
in  large  numbers  entered  foreign  countries  to  solicit  business. 
The  following  table  shows  the  foreign  business  of  the  large 
United  States  companies  which  have  to  any  extent  entered  the 
international  field. 


Life  Insurance 

Population 

in  Force 

Per  Capita 

101,577,000 

$31,155,603,975 

$307 

47,000,000 

5,870,212,000 

125 

68,000,000 

2,350,000,000 

34 

40,000,000 

762,300,000 

19 

55,000,000 

270,000,000 

5 

175,000,000 

400,000,000 

2.50 

7,000,000 

1,402,466,288 

235 

48 


EFFECTS    OF   THE   WAR   UPON    INSURANCE 


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EFFECT    ON   LIFE   INSURANCE  49 

The  war  has  had  very  decided  effects  on  the  business  of  life 
insurance,  and  these  effects  may  be  discussed  under  the  following 
heads : 

(a)  The  effect  on  the  amount  of  insurance  written. 

(b)  The  effect  on  the  policy  contract. 

(c)  The  effect  on  the  finances  of  the  companies. 

(d)  The  effect  on  the  mortality  experience. 

The  Effect  on  the  Amount  of  Insurance  Written 

The  decrease  in  the  amount  of  insurance  written  since  the 
beginning  of  the  war  is  due  primarily  to  two  causes.  In  the  first 
place,  the  cost  of  insurance  was  largely  increased  by  the  greatly 
enhanced  hazard  of  war  service  by  prospective  applicants.  As 
will  be  described  later,  some  companies  have  refused  to  insure 
those  entering  the  military  and  naval  service,  and  practically  all 
companies  increased  the  premium  charge  to  a  marked  amount,  so 
that  for  many  the  cost  of  insurance  practically  became  pro- 
hibitive. In  the  early  stages  of  the  war  the  unusual  condition 
prevailed  of  many  seeking  insurance  and  either  being  refused 
insurance  directly,  or  being  asked  to  pay  such  a  price  that  it  was 
impossible  for  the  applicant  to  purchase  it.  The  companies  did 
not,  and  could  not,  know  what  extra  premium  to  charge  to  meet 
the  increased  mortality  hazard,  since  statistics  of  mortality  in 
previous  wars  were  either  incomplete  or  could  be  used  only  as 
an  imperfect  index  of  the  mortality  to  be  expected  from  the 
present  war  which  was  being  conducted  on  a  scale  of  human 
destructiveness  never  before  known  to  civilized  man.  The 
numbers  engaged  and  the  methods  of  combat  used  were  so  dif- 
ferent from  those  of  previous  wars  that  the  known  principles 
of  predicting  mortality  were  of  little  use.  As  a  result,  rates  for 
life  insurance  were  very  materially  increased,  varying  in  different 
companies  and  countries,  but  amounting  to  a  marked  increase 
in  cost,  as,  for  example,  from  $25  to  $50  or  more  on  the  $1,000 
of  insurance.    The  second  cause  of  the  decrease  in  insurance  is 


50  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

found  in  the  fact  that  many  insurance  officials  and  salesmen 
were  withdrawn  from  their  insurance  activities  to  serve  in  the 
army,  navy,  or  other  branches  of  the  state  service.  Even  if  the 
places  of  these  trained  men  were  filled,  the  inexperienced  sub- 
stitute could  not  be  expected  to  secure  the  results  of  the  experi- 
enced man. 

The  following  table  shows  how  the  war  affected  the  leading 
English  companies  during  the  earlier  periods  of  the  war: 

Business  within  Business  outside 

the  United  Kingdom  the  United  Kingdom 

£  £ 

Company                          1914  1915  1914  1915 

Alliance  1,436,400  777,300                 4,000        

Commercial    Union..  2,352,300  1,640,300  81,700*         57,400 

Gresham    35i,30o  341,000  1,412,000  772,600 

Legal  and  General .. .  2,660,500  1,426,800            

London    Life 815,000  502,900            

North    British 2,020,600  1,141,200  238,400           183,500 

Norwich  Union 2,857,200  2,232,300  1,786,300        1,172,200 

Phoenix    1,026,400  695,200  240,400           168,100 

Prudential   ( Ord.) . . .  6,318,800  6,619,200            

Prudential    (Ind.)...  32,291,600  35,112,800            

Refuge   (Ord.) 2,513,100  2,658,900            

Refuge    ( Ind. ) 1 1,375,600  8,364,600            

Scottish    Provident. .  1,654,700  1,172,600            

Scottish  Widows   . . .  1,981,100  1,592,900  109,700             62,900 

Sun  2,692,900  1,902,300            

United  Kingdom  Pro- 
vident   1,080,600  1,017,400            


Total    73,428,100        67,197,700  3,872,500        2,416,700 

So  far  as  statistics  are  available,  similar  results  are  shown 
for  a  number  of  other  countries  engaged  in  the  war,  except 'in 
such  nations  as  the  United  States,  which  has  too  recently  entered 
into  active  participation  in  the  struggle,  and  Japan,  which  has 
taken  as  yet  no  very  active  part  in  the  war.  In  the  latter  country, 
owing  to  the  general  prosperity  prevailing,  due  largely  to  the 
war  and  to  the  fact  that  life  insurance  companies  are  being 
organized  and  operated  on  a  modern  basis,  the  amount  of  life 
insurance  is  greatly  on  the  increase.  The  following  table  indi- 
cates the  character  and  extent  of  this  increase  in  life  insurance 
in  Japan : 


EFFECT  ON  LIFE  INSURANCE 


51 


Growth  of  Life  Insurance  in  Japan  since  1880 


Year 


1880. 
1882. 
1892. 
1902. 
1903. 
1904. 
1905. 
1906. 
1907. 
1908. 
1909. 
1910. 
1911. 
1912, 

1913. 
1914. 


Number  of 
Companies 

I 

I 


37 
38 
34 
33 
31 
32 
32 
32 
33 
36 
40 
39 


Amount 
of  Reserves 


Number  of  Poli- 
cies in  Force 


$12,372 

500,772 

8,468,535 


42,825,000 
51,292,000 
61,732,000 


668,735 

728,714 

721,275 

738,539 

818,377 

941,584 

1,050,900 

1,110,782 

1,155,790 

1,291,451 

1,688,683 

1,862,433 


Amount  of 

Outstanding 

Insurance 


$90,825,557 
103,431,922 
106,688,415 
115,480,395 
137,839,652 
175,042,254 
211,482,912 
240,018,852 
269,032,254 
323,034,542 
481,655,000 
542,541,000 


In  Canada  no  marked  decrease  in  insurance  in  force  has  shown 
up  to  the  end  of  the  year  191 6,  In  Canada,  as  in  England, 
special  efforts  were  made  in  the  early  stages  of  the  war  to 
postpone  the  increase  in  the  premium  charge.  Premiums  in 
Canada  were  increased  in  some  companies  only  15  per  cent  and 
in  none  more  than  25  per  cent.  There  was  a  general  disposition 
on  the  part  of  the  companies  to  assume  as  much  as  possible  of 
the  burden  of  the  war  insurance  cost,  and  in  some  cases  cities, 
such  as  Toronto,  assumed  a  part  of  the  increased  cost.  Then, 
too,  the  officials  of  the  insurance  companies  did  not  know  what 
extra  charge  to  assess.  In  some  cases,  this  resulted  in  a  post- 
ponement of  an  extra  charge,  and  in  other  cases,  of  a  small 
increase  which  doubtless,  under  the  strong  competitive  conditions 
prevailing  in  the  business,  deterred  other  officials  from  increasing 
the  premium  for  fear  the  company  would  lose  business.  In  time, 
however,  as  the  war  progressed,  the  increase  in  the  premium  has 
been  made.  The  real  effects  of  the  war  on  the  volume  of  life 
insurance  in  force  can  only  be  known  after  the  war  has  ended. 
There  has  been,  as  in  many  other  aspects  of  the  war,  a  complex 
of  opposing  motives  in  force.  On  the  one  hand  is  the  desire  of 
those  who  are  enrolled  or  who  expect  to  be  enrolled  for  war 
service,  to  avail  themselves  of  the  protection  which  insura'ice 

*  The  Economic  World,  n.  s.,  vol.  xiv.  No.  5,  p.  167. 


52  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

affords  for  their  dependents.  On  the  other  hand  is  the  company 
which  desired  new  business,  but  which  did  not  know  what  extra 
charge  ought  to  be  levied  in  order  to  protect  the  present  and 
future  contracts.  Uniformity  of  action  was,  therefore,  difficult 
to  secure,  and  for  a  time  chaos  in  the  life  insurance  business, 
as  in  many  other  lines  of  business,  prevailed. 

The  following  table  shows  that  in  Canada  there  was  no  actual 
decrease  in  the  amount  of  life  insurance  in  force  up  to  the  close 

•^      ■  Percentage  of 

Increase  to 

Increase  in  New 

New  Insur-  In  Force  at  Insurance  Insur-  In  Force 

Year                     ance  Issued  End  of  Year  in  Force  ance    at  Jan.  i 

1907 $90,382,932  $685,523,485  $29,262,585  32.4        4.5 

1908 99,896,206  719,516,014  33,992,529  "340        5.0 

1909 131,739,078  780,356,980  60,840,966  46.2        8.5 

1910 152,762,520  856,113,059  75,756,079  49.6        9.7 

1911 176,866,979  950,220,771  94,107,712  53.2      II.O 

1912 219,205,103  1,070,308,669  120,087,898  54.8      12.6 

1913 231,608,546  1,168,590,027  98,281,358  42.4        9.2 

1914 217,006,516  1,242,160,478  73,570,451  33-9        6.3 

1915 221,119,558  1,311,616,677  69,456,199  31.4        5.6 

1916 231,146,125  1,402,466,288  90,849,611  39.3        6.9 

In  Germany  preceding  the  war  the  life  insurance  companies 
had  enjoyed  several  years  of  great  prosperity.  Both  the  amount 
of  insurance  in  force  and  the  amount  of  new  business  had  been 
increasing  in  a  very  satisfactory  manner. 

At  the  outbreak  of  the  war,  the  amount  of  new  business 
written  annually  amounted  to  over  1,300,000,000  marks,  and 
the  total  amount  of  life  insurance  in  force  aggregated  over 
16,000,000,000  marks,  with  an  annual  premium  income  of  about 
700,000,000.^ 

The  war  has  had  a  marked  effect  on  the  business.  Agency  and 
field  forces  of  the  companies  have  been  destroyed  or  disorganized, 
because  many  have  been  called  to  war  service.  Economic 
depression  has  had  its  effect  in  decreasing  the  business.  In  191 3 
the  German  companies  wrote  about  1,334,000,000  marks  of  new 
business,  but  in  1914  this  amount  had  decreased  to  978,000,000 

^  The  Economic  World,  n.  s.,  vol.  xiii.  No.  26,  p.  923. 
^  Ibid.,  vol.  xiv.  No.  9,  p.  313. 


EFFECT    ON    LIFE   INSURANCE  53 

marks,  and  in  191 5  only  437,000,000  marks  of  new  business  was 
placed  on  the  books;  that  is,  about  one-third  of  the  new  business 
of  1913.  The  industrial  life  insurance  in  1914  showed  a  decrease 
in  the  amount  insured  of  56,000,000  marks. 

In  Russia  the  German  insurance  companies  held  the  most 
important  position  in  all  fields  of  the  business,  not  excluding  the 
Russian  companies.  With  the  outbreak  of  the  war,  the  business 
of  insurance  with  enemy  companies  was  restricted  or  wholly  pro- 
hibited. This  has  resulted  in  an  extension  of  the  business  of 
the  domestic  companies,  although  the  disturbed  conditions  which 
have  since  prevailed  in  Russia  have  prevented  the  normal  ex- 
tension of  life  insurance. 

Lapses  and  Surrender  of  Policies 

However,  the  effect  of  the  war  on  the  amount  of  insurance  in 
force  will  be  determined  not  only  by  the  actual  amount  of  new 
business  placed  on  the  books  of  the  companies,  but  also  by  the 
extent  of  surrenders  and  lapses  of  policies  in  force.  Several 
factors  will  contribute  to  this  latter  cause.  In  the  first  place, 
the  life  insurance  policy  provides  that  a  policy  lapses  if  the 
premium  is  not  paid  when  due,  or  within  a  period  of  grace,  fre- 
quently established  at  thirty  days.  Many  of  those  holding  insur- 
ance policies  are  now  engaged  in  some  branch  of  the  military 
service.  Many  policyholders  do  not  know  when  premiums  are 
due,  but  depend  upon  notification  from  the  company  as  to  the 
time  of  payment.  As  is  well  known,  such  a  notice  could  not 
promptly  reach  many  policyholders  even  if  the  address  were 
known.  Means  and  methods  of  communication  are  either  wholly 
absent  or  difficult.  In  the  second  place,  many  of  the  policy- 
holders who  are  in  the  service  of  the  nation  will  not  have  the 
money  in  their  possession  to  pay  the  premiums  when  they  are 
due.  The  remuneration  which  is  received  in  the  service  and  the 
conditions  of  living  make  it  difficult  for  many  to  save  enough  to 
pay  the  premium.  Yet  the  policy  requires  that  premiums  shall 
be  promptly  paid.    In  the  case  of  many  policy  contracts,  the  non- 


54  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

payment  of  the  premium  is  the  one  remaining  ground  on  which 
the  payment  of  the  policy  can  be  contested.  Most  of  the  earlier 
restrictions  which  voided  the  policy  have  been  abolished.  It  is 
true  that  provision  is  made  in  most  of  the  policies  for  what  is 
called  extended  insurance,  in  case  the  policy  lapses  on  the  failure 
to  pay  the  premium  which  is  due.  This,  however,  becomes  a 
valuable  consideration  only  in  the  case  of  those  policies  which 
have  been  in  force  for  some  time,  since  the  first  premiums  do 
not,  after  the  expenses  of  insuring  the  applicant  are  paid,  con- 
tribute a  large  amount  to  the  individual  reserve  on  the  policy 
which  determines  the  length  of  time  that  the  insurance  will  be 
extended.  This  situation,  therefore,  has  caused  in  some  coun- 
tries legislative  proposals,  and  in  some  cases  legisla^ve  enact- 
ments, which  have  for  their  purpose  the  continuation  of  the 
policy  in  force,  in  case  the  premium  is  not  paid  when  it  is  due. 
This  is  an  application  of  the  moratorium  principle  to  insurance, 
and  is  discussed  elsewhere  in  this  monograph.  The  position  of 
the  officials  of  the  insurance  companies  is  not  so  simple  as  might 
at  first  be  supposed.  These  officials  are  in  the  nature  of  trustees 
for  the  policyholders  in  general,  and  should  at  all  times  so 
manage  the  finances  of  the  company  as  to  secure  full  payment 
on  all  contracts,  and  at  the  lowest  cost  to  all.  No  life  insurance 
company  is  conducted  on  the  basis  of  holding  large  amounts  of 
actual  cash  on  hand.  The  funds  are  invested  in  long  time  securi- 
ties. The  assets  are  not,  in  other  words,  of  a  liquid  character. 
Claims  are  maturing  daily  and  are  paid  in  part  out  of  the  large 
premium  income  which  comes  to  the  companies.  If,  therefore, 
this  stream  of  incoming  funds  is  decreased,  and  at  the  same  time 
the  outgoing  stream  is  not  only  not  decreased,  but  probably 
increased,  some  other  source  of  supply  must  be  found.  The  only 
other  source  is  found  in  the  funds,  invested  in  these  long  time 
securities,  or  the  interest  accumulations  on  them  which  must 
be  diverted  from  the  ordinary  channels  of  flow  to  the  payment 
of  these  maturing  claims  which  are  not  met  by  the  normal  flow 
of  income  from  premium  receipts. 


EFFECT   ON    LIFE   INSURANCE  55 

Loans  on  Policies 

There  is  not,  however,  any  evidence  as  yet  in  the  United 
States,  Canada,  or  England  that  the  war  is  causing  either  an 
extra  demand  for  loans  on  policies  or  that  surrenders  are  more 
frequent.  The  situation  as  it  existed  in  England  at  the  close  of 
19 1 6  is  presented  as  follows  by  a  writer.^ 

In  the  United  States  and  Canada  during  the  financial  crisis  which  set  in 
at  the  end  of  1907,  hfe  insurance  offices  had  to  sustain  something  Uke  a 
Hmited  run  upon  their  resources,  due  to  the  large  demand  for  policy  loans 
or  the  surrender  value  of  policies  from  financially  distressed  policyholders, 
and  a  few  of  the  companies  were  seriously  embarrassed  to  find  sufficient 
funds  to  meet  the  claims  made  upon  them.  It  was  this  experience  which 
led  British  offices  to  view  with  apprehension  when  the  war  broke  out  in 
1914  any  similar  development  in  this  country.  We  have  already  shown  that 
in  the  case  of  loans  the  fears  entertained,  and,  as  far  as  possible,  very  pru- 
dently provided  against,  were  not  justified,  the  principal  offices  showing  a 
slight  decrease  in  the  amount  of  loans  outstanding  at  the  end  of  1915  as 
compared  with  the  close  of  1914,  and  the  ratio  to  life  and  annuity  funds 
declining  from  y.j  to  7.6  per  cent. 

With  regard  to  surrenders,  practically  the  same  tendency  has  been  exhib- 
ited and  the  sum  which  the  companies  were  called  on  to  pay  in  this  respect 
in  191 5  was  a  trifle  smaller  than  in  1914.  This  is  the  more  satisfactory  as 
the  issues  involved  are  of  greater  importance  than  in  the  case  of  policy 
loans.  In  granting  a  loan,  an  office  is  perfectly  sure  of  its  capital,  for  it  is 
covered  by  the  amount  assured,  and  all  the  office  does  is  to  lock  up  its  money 
at  a  possibly  inconvenient  time.  In  paying  out  a  surrender  value,  though 
the  office  extinguishes  a  future  liability,  it  is  parting  with  a  good  life,  and 
increasing  the  rate  of  mortality  amongst  the  remainder.  This  is  the  teach- 
ing of  experience,  since  only  those  policies  which  have  been  fairly  long  in 
force  have  acquired  a  surrender  value,  and  therefore  represent  healthy  lives ; 
policyholders  in  indifferent  health  do  not  want  to  take  the  surrender  value 
of  their  policies,  except  under  the  extreme  pressure  of  adverse  circum- 
stances. So  far  as  the  last  two  years  are  concerned,  the  offices  have  lost  the 
advantage  of  many  of  their  best  lives  through  their  patriotic  action  in  asking 
no  ^xtra  premium  for  war  risks  from  policyholders  existing  at  the  outbreak 
of  hostilities,  and  to  that  extent  it  may  be  said  that  an  increase  in  surrender 
values  which  might  have  otherwise  occurred  has  been  shifted  to  the  advance 
in  mortality  claims  represented  by  war  deaths. 

Surrender  values,  like  policy  loans,  have  never  figured  as  prominently  in 
the  finance  of  British  offices  as  in  that  of  colonial  and  American  companies. 
The  amount  paid  for  surrenders  by  the  latter  averages  about  2.3  per  cent 
of  the  amount  of  life  and  annuity  funds,  whilst  the  ratio  of  British  offices — 

'  The  Economist  (London),  vol.  Ixxxiii,  September  16,  1916. 


56 


EFFECTS    OF   THE    WAR   UPON    INSURANCE 


including  the  industrial  department — is  only  0.6  per  cent.  This  proportion 
has  varied  but  little  during  the  last  thirty  years.  In  the  eighties  it  was  0.5 
per  cent,  it  fell  to  0.4  per  cent  in  the  nineties,  and  since  1900  it  has  moved 
up  to  the  present  level.  This  rise  is  unimportant  if  we  bear  in  mind  the 
much  wider  knowledge  policyholders  now  have  of  the  rights  attaching  to 
policies,  of  their  greater  willingness  to  make  use  of  them,  should  the  need 
arise,  and  of  the  inclusion  of  surrender  of  bonuses. 

In  the  table  below  is  shown  the  amount  paid  in  surrender  values  last  year 
by  offices  whose  new  assurance,  except  in  the  case  of  certain  of  the  indus- 
trial companies,  amounted  to  over  half  a  million,  together  with  the  increase 
or  decrease  as  compared  with  1914  and  the  ratio  to  life  and  annuity  funds 
in  1915  and  1910: 


Ordinary 

Alliance    

Caledonian    

Clerical,  Medical  &  General 

Commercial  Union   

Gresham    

Law  Union  &  Rock  

Legal  &  General 

Liverpool  &  London  &  Globe 

London  &  Lancashire 

London  Life   

National  Provident  

North   British  &  Mercantile 

Norwich   Union    

Pearl    

Phoenix    

Prudential    

Refuge    

Royal  Exchange  

Royal  Insurance  

Scottish  Amicable   

Scottish  Equitable   

Scottish    Provident    

Scottish  Temperance 

Scottish  Union  &  National. . 

Scottish  Widows   

Standard   

Star    

Sun  

United   Kingdom   Provident 

Industrial 

Britannic 

London   &    Manchester 

Pearl    

Prudential    

Royal  London  Mutual 

Wesleyan  &  General 


Ratio   to 

Life 

Surrender 

Decrease 

and  Annuity 

Values 

or  Increase 

Funds 

1915 

on  1914 

1910 

191S 

£ 

£ 

.% 

% 

104,400 

— 11,200 

0.4 

0.6 

20,500 

+  6,400 

0.5 

0.5 

27,800 

— 10,200 

0.3 

0.4 

143.600 

-+28,400 

0.7 

0.9 

67,300 

—  2,100 

0.7 

0.6 

43,700 

+  2,000 

0.7 

0.5 

31,700 

4-  1,600 

0.2 

0.3 

31,700 

—42,300 

0.4 

0.6 

39,900 

-f  1,600 

0.8 

I.O 

55,200 

+17,900 

0.3 

I.I 

25,300 

—    300 

0.3 

0.3 

59,300 

— 27,600 

0.2 

0.3 

155,100 

+34,600 

1.2 

I.I 

36,500 

+     300 

0.9 

0.8 

66,100 

+     200 

0.5 

0.6 

415,700 

— 46,600 

1.4 

0.8 

85,200 

—  1,100 

2.4 

2.9 

30,700 

—  4,000 

0.7 

0.6 

66,900 

+  4,300 

0.5 

0.5 

44,400 

+18,000 

0.3 

0.7 

28,500 

—  1,100 

0.7 

0.4 

65,100 

—34,900 

0.5 

0.4 

13,300 

—    400 

0.6 

0.5 

35,100 

—  8,100 

0.3 

0.4 

160,600 

+     800 

0.6 

0.7 

151,000 

+16,000 

0.5 

I.I 

39,200 

— 29,400 

I.I 

0.5 

81,400 

+13,300 

0.6 

0.7 

40,800 

—  7,300 

0.6 

0.4 

8,800 

—  3>8oo 

1.2 

0.4 

3,100 

—  1,100 

1.2 

0.3 

2,600 

—      100 

0.05 

0.04 

195,400 

—19,500 

0.7 

0.4 

3,100 

—  3,200 

0.2 

0.08 

3,200 

—11,500 

30 

0.2 

EFFECT  ON  LIFE  INSURANCE  57 

The  total  amount  paid  by  the  companies  in  the  above  group  in  1915  in  the 
ordinary  department  was  £2,166,000,  as  against  £2,247,200  in  1914,  a  decrease 
of  £81,200,  or  over  3  per  cent.  The  amount  in  1910  was  £1,955,700.  In 
1915  the  ratio  to  life  and  annuity  funds  was  0.6  per  cent,  but  in  the  other 
two  years  it  was  the  same  at  0.7  per  cent.  In  the  industrial  department  the 
sum  paid  in  1915  was  £216,200  as  compared  with  £255,400  in  1914,  a  drop 
of  £39,200,  or  more  than  15  per  cent.  The  figure  in  1910  was  £288,900. 
There  has  been  a  steady  decline,  with  some  fluctuations,  in  the  industrial 
department  since  the  eighties,  when  the  ratio  was  as  high  as  1.7  per  cent. 
In  the  case  of  the  companies  in  the  table,  the  proportion  in  1915  was  0.3 
per  cent  as  against  0.4  per  cent  in  1914  and  0.6  per  cent  in  1910.  There  are 
special  reasons  for  this.  On  an  average  20  per  cent  of  industrial  policies 
lapse  in  five  years  without  becoming  claims,  and  the  policyholders  are  of  a 
class  who  are  not  the  most  conversant  with  their  rights  and  privileges.  In 
the  majority  of  instances,  too,  where  surrender  values  accrue,  it  is  the  cus- 
tom to  discharge  the  liability  with  a  paid-up  policy  for  the  amount  due  in 
lieu  of  payment  in  cash.  The  Refuge  makes  no  immediate  cash  payments 
for  the  surrender  value  of  an  industrial  policy. 


The  Effect  on  the  Terms  of  the  Life  Insurance 
Policy  Contracts 

The  second  effect  of  the  war  on  life  insurance  to  be  discussed 
is  the  changes  which  have  been  necessitated  in  the  poHcy  con- 
tract. These  modifications  have  pertained  to  the  following  sub- 
jects: First,  the  insertion  of  a  military  service  clause  and  a 
modification  of  the  disability  clause  to  cover  the  contingency  of 
disability,  due  to  military  service;  second,  certain  increases  in 
the  premium  charge  and  in  the  provisions  with  respect  to  the 
time  of  payment  of  the  premium. 

In  order  to  understand  the  changes  which  were  made  in  con- 
nection with  military  service,  it  is  necessary  to  refer  to  the 
history  of  what  may  be  called  the  liberalization  of  the  policy 
contract.  Thirty  years  ago  the  life  insurance  policy  had  many 
limitations  upon  the  policyholders'  privilege  of  residence  and 
occupation.  Even  in  a  single  country  such  as  the  United  States, 
it  was  not  unusual  to  find  restrictions  upon  residence  in  certain 
sections  of  the  country,  believed  to  be  unhealthy,  and  residence 
in  tropical  and  polar  regions  was  usually  prohibited  in  all  policies. 
Restrictions  as  to  occupations  in  which  the  policyholder  might 


58  EFFECTS    OF   THE   WAR   UPON   INSURANCE 

engage  were  also  common,  and  military  or  naval  service  was 
particularly  under  the  ban.  These  restrictions  either  provided 
that  the  policy  become  void,  or  required  the  special  consent  of 
the  officials  of  the  company  and  the  payment  of  an  extra 
premium.  Even  in  the  most  liberal  policies,  the  face  of  the 
policy  was  not  paid  in  full  in  case  of  death  in  the  military  or 
naval  service. 

Several  causes  contributed  to  a  liberalization  of  the  policy 
contracts.  In  some  respects  it  was  due  to  legislative  enactments, 
especially  in  the  provisions  with  respect  to  cash  surrender  valueSj 
payment  of  dividends  and  other  matters  pertaining  to  the  normal 
conditions  of  peace  times.  But  the  more  important  factors  pro- 
ducing a  more  liberal  policy  contract  were  the  increg^sed  com- 
petition among  the  companies  for  business,  and  a  growing  belief 
that  serious  mortality  losses,  as  a  result  of  war,  were  not  prob- 
able. On  the  one  hand,  the  aggressive  agency  forces  and  man- 
agers desired  to  make  their  policy  more  attractive  to  prospective 
purchasers.  At  the  same  time  the  general  conditions  of  peace, 
which  had  long  prevailed  after  the  wars  of  the  third  quarter  of 
the  nineteenth  century,  together  with  the  seemingly  accumulative 
evidence  of  an  increasing  feeling  of  human  solidarity,  persuaded 
the  managers  of  the  life  offices  that  the  rigid  restrictions  on 
military  service  were  unwarranted  by  the  prevailing  and 
prospective  conditions.  This  was  the  general  situation  in  most 
of  the  countries  now  engaged  in  the  great  war.  It  is  not  to  be 
understood,  however,  that  the  above  circumstances  had  resulted 
in  a  life  insurance  policy  contract  which  was  absolutely  free  from 
restrictions  on  military  service.  The  condition  above  described 
is  one  which  evolved  from  a  situation  of  very  general  prohibition 
to  one  of  limited  restrictions.  Nor  was  there  a  state  of  anything 
approximating  uniformity  in  these  policy  restrictions,  either  in 
different  countries  or  in  different  life  companies  in  the  same 
country. 

It  will  be  understood  that  one  of  the  marked  effects  of  the  war 
on  the  life  insurance  policy  contract  was  to  check  that  liberaliza- 
tion of  the  policy  contract  which  had  been  in  process  for  several 


EFFECT  ON  LIFE  INSURANCE  59 

decades,  and  to  return  to  the  restrictions  of  an  earlier  date. 
There  are,  therefore,  three  classes  of  policyholders  who  are  to 
be  considered  in  a  discussion  of  these  restrictions  on  military 
service.  First,  there  are  those  old  policyholders  who  now  hold 
policies  with  the  stringent  restrictions  of  the  early  date.  They 
are  of  no  great  significance,  so  far  as  actual  military  service  on 
their  part  is  concerned,  since  they  are  in  most  cases  excluded 
from  such  service  by  the  limitations  of  age. 

In  the  second  class  there  are  those  large  numbers  of  policy- 
holders who  have  been  insured  during  the  late  years  under  the 
liberalized  policy.  Life  insurance  in  all  the  leading  countries  has 
increased  very  rapidly  during  the  past  decade,  and  policies  are 
now  held  by  many  who  have  entered,  or  will  enter,  some  branch 
of  the  service.  These  policyholders  are  not  only  interested  in 
having  their  policies  matured  under  their  present  terms,  but  they 
are  also  interested  in  such  provisions  as  to  whether,  in  case  of 
military  service,  they  are  compelled  to  pay  an  extra  premium. 
This  class,  as  well  as  the  preceding  class  of  older  men,  is  also 
interested  in  the  terms  under  which  new  entrants  are  accepted; 
that  is,  if  new  applicants  should  be  accepted  at  a  premium  rate 
which  does  not  represent  the  hazard  of  war,  not  only  would  the 
annual  cost  of  the  insurance  to  these  older  policyholders  be 
affected,  but  under  certain  circumstances  the  very  integrity  of 
their  insurance  might  be  jeopardized.  It  is  advisable,  therefore, 
to  analyze  the  situation  in  the  leading  countries  with  respect  to 
the  provisions  of  the  life  insurance  policy  contract  at  the  out- 
break of  the  war,  and  also  the  changes  which  have  been  made. 
It  may  be  stated  by  way  of  a  preface  to  the  following  discussion, 
that  there  has  been  a  disposition  among  the  officials  of  life  insur- 
ance organizations  to  apply  the  restrictions  in  the  most  limited 
manner.    On  this  point  the  following  statement  is  pertinent. 

This  attitude  has  been  induced  by  considerations  of  two  different  orders. 
First,  motives  of  disinterested  patriotism  and  of  desire  to  subordinate  purely 
business  interests  to  the  country's  good  have  been  as  strong  in  the  minds 
and  hearts  of  those  charged  with  the  conduct  of  our  life  insurance  as  in  the 
minds  and  hearts  of  any  other  class  in  the  community.    They  have  felt  very 


6o  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

deeply  the  self-sacrifice  involved  for  such  American  citizens  as  in  the  cause 
of  all  of  us  undertake  the  ultimate  risk  of  all  risks,  that  of  the  loss  of  their 
lives;  and  they  have  shrunk  from  adding  to  the  burden  of  this  self-sacrifice 
by  presenting  to  those  about  to  make  it  a  heavy  bill  over  and  above  what 
they  have  been  hitherto  called  upon  to  pay  for  the  protection  of  those 
dependent  upon  them  and  loved  by  them.  On  this  account  alone,  the  dis- 
cussion of  the  now  inescapable  war  risk  provisions  attaching  to  life  insur- 
ance policies  on  the  part  of  our  life  insurance  leaders  has  been  dominated 
by  the  feeling  that  the  restrictions  must  be  made  as  little  burdensome  as 
possible  and  that  the  extra  charges  must  be  kept  down  to  the  lowest  possible 
point.  Again,  it  is  undeniable  that  the  readiness  with  which  a  certain  class 
of  our  pohticians  and  other  soi-disant  expounders  of  public  opinion  make 
use  of  any  and  all  excuses  for  attacking  insurance  companies,  on  the  ground 
of  the  asserted  exorbitance  of  the  cost  of  the  services  they  render,  breeds 
in  members  of  the  insurance  fraternity  a  disposition  to  avoid  anything  that 
may  be  construed,  even  by  malicious  tongues,  as  taking  advantage  of  an 
opportunity  to  raise  the  price  of  the  insurance  sold.  Hence  a  very  natural 
hesitation  on  the  part  of  life  insurance  managers  in  the  United  States  to 
base  their  calculations  and  their  decisions  in  the  matter  of  war  risk  restric- 
tions and  premiums  upon  the  cold  and  impersonal  facts  and  figures  that  the 
actual  experience  of  this  war  upon  which  we  are  about  to  enter  has  yielded 
to  the  statisticians  and  actuaries.  .    .    . 

Leaving  aside  this  last  suggestion  as  highly  improbable  of  acceptance  in 
this  country,  even  the  most  patriotic  among  us  can  not  avoid  a  certain  doubt 
as  to  the  advisability  of  having  our  life  insurance  institutions  undertake  the 
hazard  which  is  implied  by  their  undertaking  to  do,  on  a  scale  about  which 
calculation  in  advance  is  naturally  out  of  the  question,  that  which  all  the 
available  experience  from  belligerent  countries  indicates  to  be  one  of  very 
considerable  magnitude.  All  will  agree  that  life  insurance  protection  for  the 
defenders  of  the  country's  cause,  and  that  at  a  rate  which  is  not  intolerably 
high,  is  one  of  the  greatest  of  desiderata  in  the  present  exigency  of  the 
country's  affairs.  None  the  less,  the  maintenance  of  the  unquestioned  security 
of  our  life  insurance  as  a  whole  is  not  only  equally  important  from  the  point 
of  view  of  the  interests  of  the  general  body  of  policyholders  but  also  from 
that  of  the  country's  success  in  the  war.  For  at  least  one-tenth  of  the  finan- 
cial resources  required  for  the  prosecution  of  the  war  must  come  from  the 
accumulations  which  the  life  insurance  companies  hold  in  trust  for  those 
policyholders. 

It  may  be  said — and  truly — that  if  the  distribution  of  ages  for  insured 
lives  were  to  remain  what  it  now  is  on  the  books  of  our  insurance  com- 
panies, there  would  be  no  great  element  of  danger  to  the  companies  from 
their  war  risks,  even  at  inadequate  rates,  inasmuch  as  the  proportion  of  men 
of  military  age  among  the  insured  is  small.  The  difficulty  here  is  that  the 
very  war  itself  will  induce  an  extraordinary  accession  of  applicants  called 
to  the  flag — applicants  who  can  not  well  be  refused  and  who,  of  course,  will 
immediately  disturb  greatly  the  proportion  between  the  companies'  total  war 
risk  exposures  and  their  insurances   free   from  this  exposure.     Inadequacy 


EFFECT   ON    LIFE   INSURANCE  6 1 

of  war  risk  rates  will  accordingly  produce  malign  effects  far  greater  than 
the  present  distribution  of  ages  would  indicate.' 

In  the  United  States  the  liberalization  of  the  policy  contract 
had  especially  been  great  and  when  the  war  opened,  there  was 
no  agreement  as  to  what  should  be  done.  The  mortality 
experience  in  the  Spanish-American  War,  both  from  death 
and  disease,  was  only  about  20  per  1000  for  officers,  and  25  per 
1000  for  men,  and  the  insurance  officials,  who  at  that  time  had 
placed  at  the  beginning  of  this  war  no  great  restrictions  on  the 
policy  contract,  had  had  their  judgment  vindicated.  There  was 
some  disposition  on  the  basis  of  this  experience  to  adopt  only 
very  moderate  restrictions.  Other  war  mortality  statistics,  how- 
ever, indicated  caution.  In  the  Mexican  War,  the  combined 
death  rate  from  wounds  and  disease  was  118  per  1000,  and  in 
the  Civil  War,  the  average  annual  death  rate  was  approximately 
no  per  1000,  with  a  disease  death  rate  of  69  per  1000.  In  the 
Franco-German  War,  the  German  army  had  a  death  rate  of  42 
per  1000,  and  in  the  Chino-Japanese  War,  the  death  rate  for 
the  Japanese  army  was  about  25  per  1000.  All  this  data  did  not, 
however,  aid  greatly  in  determining  what  extra  charge  or  restric- 
tions should  be  made  by  the  American  life  insurance  companies. 

Efforts  to  Unify  War  Clause 

In  an  effort  to  agree  upon  some  uniform  provision,  an  investi- 
gation was  made  of  the  existing  practice  of  the  life  insurance 
companies.  The  practice  of  221  United  States  companies,  hav- 
ing 99.75  per  cent  of  the  life  insurance  in  force  at  the  end  of 
19 1 5,  was  collated. 

The  tables  were  based  upon  an  analysis  of  policies  submitted 
by  152  of  these  companies,  including  98.24  per  cent  of  the  total 
business.  The  committee  warns  the  reader  that  the  insurance  in 
force  was  not  all  on  the  plan  of  which  the  classification 'is  descrip- 
tive. It  was  impossible  to  make  any  classification  showing  the 
different  assets  of  insurance  in  force  with  and  without  war  claims. 

*  The  Economic  World,  n.  s.,  vol.  xiii,  No.  18,  p.  632. 


62 


EFFECTS    OF    THE    WAR    UPON    INSURANCE 


Out  of  the  221  companies  with  99.75  per  cent  of  the  insurance 
in  force,  it  was  found  that  122  with  77.18  per  cent  of  the 
insurance  in  force  issued  policies  at  the  beginning  of  191 5  with 
no  restrictions  as  to  naval  or  military  service,  either  in  times 
of  peace  or  war.  The  remaining  99  with  22.55  P^^'  '^^^^  o^  the 
insurance  in  force  issued  policies  at  that'  time  with  some  kind  of 
clause  restricting  the  policyholder  as  to  such  service. 

Of  88  companies,  from  which  one  or  more  policies  were 
examined,  there  were  44,  with  $8,631,000,000  in  force,  which 
made  no  specific  reference  to  war  service  in  their  policies.  Forty- 
four  others  with  insurance  in  force  of  $8,691,000,000,  had 
clauses  stating  specifically  that  there  was  no  such  restriction. 
The  committee  grouped  the  companies  which  had  restrictive 
clauses  into  two  classes,  as  shown  by  the  following  table. 

Classification  of  War  Clauses  in  United  States  Life  Insurance 

Companies 


I.   Continuous  Restrictions 

(Effect  of  war  service  without 
consent) 

(a)  Policy  becomes  void 

(b)  Benefits  reduced: 
(i)  To  gross   premium 

(2)  To  net   premium 

(3)  To  legal  reserve 

(4)  To  cash  surrender  value 

(5)  By  lien  or  otherwise.. 

(c)  Not  specified   

Total  Class  I   

II.   Limited    Restrictions     (one    or 
two  years) 

(Effect  of  war  service  without 
consent) 

(a)  Policy  becomes  void 4 

(b)  Benefits  reduced : 

(i)  To  gross  premium....  8 

(2)  To  legal  reserve i 

(3)  By  lien  or  otherwise. .  2 

■(c)  Not  specified   3 

Total  Class  II   18 

Total  Classes  I  and  II 70 


No.  of 
Companies 

Insurance 
Dec.  31 

in  Force 
,  1915 

6 

$123,333,975 

3 
2 

22 

$  22,212,556 

14,736,031 

487,972,831 

3 

4 

24,071,502 
107,507,653 

656,500,573 

12 

189,128,626 

52 

$968,963,174 

Pl,49i,449,i30 

374,415,941 

1,677,608,569 


$433,744,745 

3,543,473,640 

57,916,533 

$4,035,134,918 

$5,004,098,092 


EFFECT  ON  LIFE  INSURANCE  63 

Class  I  included  those  which  had  clauses  which  provide  restric- 
tions continuous  with  the  duration  of  the  contract,  and  Class  II 
those  which  had  clauses  for  a  limited  period  of  years.  Of  the  70 
companies  having  some  kind  of  a  restrictive  clause,  52  were  in 
Class  I,  and  they  had  $968,963,000  of  the  insurance  in  force  at 
the  end  of  1915,  or  4.26  per  cent  of  the  total  life  insurance  in 
force  at  that  date.  The  remaining  18,  with  a  limited  restrictive 
clause,  had  $4,035,134,000,  or  17.75  P^^  cent  of  the  insurance 
in  force  at  the  end  of  191 5.  The  restrictions  against  military 
and  naval  service  in  the  policies  of  most  United  States  com- 
panies were  conditional  and  not  absolute.  They  usually  implied 
the  company's  consent,  and  provision  was  made  in  some  cases 
for  payment  of  extra  premiums  or  the  reduction  in  the  benefit. 

The  following  table  shows  the  terms  upon  which  the  company's 
consent  could  be  received.  Of  the  70  companies  whose  policies 
were  examined,  only  21  specify  the  terms  upon  which  exemption 
may  be  specifically  secured,  but  these  21  companies  represent 
45  per  cent  of  the  aggregate  insurance  in  force  in  the  99  com- 
panies having  restrictions. 

Terms  upon  Which  Company's  Consent  to  War  Service  Can  Be 

Obtained 

No.  of  Insurance  in  Force 

Companies  Dec.  31,  191 5 

I.   Terms    discretionary    49  $2,650,297,420 

II.    Payment  of  extra  premium 

(a)  Amount   and   manner   to 
be     determined     by     the 

company  14  $606,790,261 

(b)  Maximum     annual     pre- 
mium specified  I  2,757,333 

(c)  Single  extra  payment : 

(i)  In  cash   I 

(2)  In  cash  or  lien   3  1,728,126,300 

Total  Class  II 19  $2,337,673,894 

III.   Creation  of   war  clause  and 
payment  of  extra  cost 

(a)  In  cash  or  by  lien  (with 
maximum  of  10  per  cent 

of  face) I  $7,033,322 

(b)  In  cash  or  by  lien  (esti- 
mated maximum    10  per 

cent  of   face)    I  9.093,456 

Total  Class  III 2  $16,126,778 


Total  Classes  I,  II  and  III  70  $5,004,098,092 


64  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

As  a  result  of  this  investigation,  a  report  was  submitted  to 
the  Association  of  Life  Insurance  Presidents,  in  which  was 
recommended  for  adoption  the  following  military  or  naval 
service  clause : 

During  the  first  ten  years  of  this  policy  military  or  naval  service  in  time 
of  vfar  is  a  risk  not  assumed  by  the  company  unless  the  insured  shall  give 
notice  thereof  to  the  company  within  thirty-one  days  after  entering  on  such 
service,  and  pay  such  extra  premiums  as  the  company  may  fix  therefor.  In 
event  of  the  insured  entering  upon  such  service  and  failing  to  give  such 
notice,  or  failing  to  pay  such  extra  premiums  at  the  times  and  in  the  manner 
required,  the  liability  of  the  company  for  death  of  the  insured  during  such 
period  of  ten  years,  while  engaged  in  or  as  a  result  of  such  service,  shall 
be  limited  to  the  reserve  at  the  time  of  death,  less  any  indebtedness  hereon 
to  the  company. 

This  recommended  clause,  or  a  modification  of  it,  has  been 
adopted  by  a  large  number  of  life  insurance  companies  in  the 
United  States.  There  is  a  considerable  difference  in  the  amount 
of  the  extra  premium  which  companies  are  charging  for  this 
extra  military  hazard.  It  will  be  observed  that  this  clause  applies 
only  to  those  who,  having  as  a  civilian  obtained  a  policy,  later 
enter  the  military  or  naval  service.  It  leaves  the  subject  of 
insuring  those  who  are  already  in  such  service  to  the  discretion 
of  the  company. 

There  is  also  a  very  great  difference  in  the  practice  of  life 
insurance  companies  in  regard  to  the  general  treatment  of  war 
risks.  Generalizations  are  impossible  to  make.  The  following 
are  some  of  the  more  important  matters  upon  which  there  is  a 
difference  in  practice : 

(a)  The  acceptance  or  nonacceptance  of  insurance  of  those 
now  in,  or  contemplating  entrance  into,  the  military  or  naval 
service. 

(b)  The  distinction  made  or  not  made  between  ordinary  mili- 
tary and  naval  service  and  aeronautic  and  submarine  service. 

(c)  The  distinction  made  between  service  in  the  United  States 
and  service  either  for  the  United  States  on  foreign  soil,  or 
service  with  a  foreign  nation. 


EFFECT   ON   LIFE   INSURANCE  65 

(d)  The  limit  of  the  amount  of  insurance  which  will  be 
granted  to  those  entering  military  or  naval  service. 

(e)  The  kind  of  policy  which  will  be  granted  to  those  entering 
the  war  service. 

(f )  The  amount  of  an  extra  premium  required  of  those  enter- 
ing war  service. 

Practice  of  Companies  in  the  United  States 

A  very  large  number  of  additional  points  upon  which  the 
practice  of  the  companies  differs  might  be  cited.  The  following 
analysis  of  the  practices  of  a  representative  number  of  com- 
panies is  given  to  illustrate  this  great  divergence  of  practice.^ 

NORTHWESTERN  MUTUAL  LIFE  INSURANCE  COMPANY 
Milwaukee,  Wisconsin 

Lives  upon  which  no  new  insurance  will  be  issued — Policies  not  issued  to 
those  in  military  or  naval  service,  or  those  contemplating  engaging  in  same. 

Extra  annual  premium  on  lives  already  insured  if  they  enter  military  or 
naval  service — $50. 

Lowest-priced  form  of  policy  written — 5-year  term. 

Extra  annual  premium  per  $1000  for  service  in  army  or  navy — $50. 

Extra  annual  premium  per  $1000  for  service  in  continental  United 
States— $50. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None  except  for  military  or  naval  service  in  time  of  war. 

Time  when  extra  premiums  are  payable— Upon  engaging  in  military  or 
naval  service. 

Liability  of  company  if  extra  premium  is  not  paid — Reserve  on  policy  in 
time  of  war. 

Period  during  which  extra  premium  is  payable — Two  years. 

Conditions  as  to  existing  business— None  on  policies  issued  prior  to 
April,  1917. 

NORTHWESTERN  NATIONAL  LIFE  INSURANCE  COMPANY 
MinneapoHs,  Minnesota 

Lives  upon  which  no  new  insurance  will  be  issued— Aeronautic  service. 
Limit  of  new  insurance  written  upon  persons  enlisting  in  the  militia— $5000. 
Ages  to  which  these  limits  apply — All. 
Extra  annual  premium  per  $1000  for  service  in  army  or  navy— $100. 

*  The  Spectator,  August  2,  1917. 


66  EFFECTS    OF    THE    WAR   UPON    INSURANCE 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States — 
None. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None. 

Time  when  extra  premiums  are  payable — Annually  in  advance. 

Liability  of  company  if  extra  premium  is  not  paid — Reserve. 

Period  during  which  extra  premium  is  payable — During  continuance  of 
service. 

OCCIDENTAL  LIFE  INSURANCE  COMPANY 

Los  Angeles,  CaHfornia 

Lives  upon  which  no  new  insurance  will  be  issued — Submarine,  aerial  and 
service  for  any  foreign  government. 

Extra  annual  premium  on  lives  already  insured  if  they  enter  military  or 
naval  service — None. 

Limit  of  new  insurance  written  upon  persons  enlisting — Army,  $2000; 
volunteers,  $2000;  navy,  $2000;  conscripted,  $2000. 

Ages  to  which  these  limits  apply — All. 

Lowest-priced  form   of   policy  written — 20-payment  life,   nonparticipating. 

Extra  annual  premium  per  $1000  for  service — Army,  $100  if  abroad;  navy, 
$100  anywhere;  volunteers,  $100  if  abroad;  conscripted,  $100  if  abroad. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
— None,  excepting  service  in  aerial  corps,  motorcycle  corps  and  munition 
factories. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None,  excepting  service  in  aerial  corps,  motorcycle  corps  and  munition 
factories. 

Time  when  extra  premiums  are  payable — At  commencement  of  such 
service  as  requires  extra  and  annually  thereafter. 

Liability  of  company  if  extra  premium  is  not  paid — Reserve  of  policy. 

Period  during  which  extra  premium  is  payable — Duration  of  service  not 
to  exceed  ten  years. 

Conditions  as  to  existing  business — Issues  prior  to  May  6,  191 7,  free  as  to 
war  service  of  any  description  provided  never  connected  with  army  or  navy 
nor  of  foreign  birth. 

EQUITABLE  LIFE  INSURANCE  COMPANY 
Des  Moines,  Iowa 

Lives  upon  which  no  new  insurance  will  be  issued — Aviation  or  in  the 
service  of  any  country  other  than  the  United  States. 

Extra  annual  premium  on  lives  already  insured  if  they  enter  such  service — 
None  in  continental  limits  of  United  States  and  10  per  cent  of  sum  insured 
to  cover  service  outside  United  States. 

Limit  of  new  insurance  written  upon  persons  enlisting — $2000. 

Ages  to  which  these  limits  apply — All  ages. 

Lowest-priced  form  of  policy  written — Ordinary  life. 


EFFECT   ON    LIFE   INSURANCE  fyj 

Extra  annual  premium  per  $1000  for  service  in  army — None  within  United 
States,  10  per  cent  without ;  navy,  10  per  cent. 

NATIONAL  LIFE  INSURANCE  COMPANY  OF  THE  UNITED 
STATES  OF  AMERICA 

Chicago,  Illinois 

Extra  annual  premium  on  lives  already  insured  if  they  enter  military  or 
naval  service — $6.25  monthly  for  balance  current  calendar  year  for  naval 
service  or  military  service  outside  of  United  States.  No  charge  to  January  i, 
1918,  for  military  service  in  United  States. 

Time  when  extra  premiums  are  payable — Upon  entering  service. 

Liability  of  company  if  extra  premium  is  not  paid — Reserve  period  during 
which  extra  premium  is  payable — During  war. 

Conditions  as  to  existing  business — Permits  granted  on  payment  of  extra 
premium  if  required. 

NEW  ENGLAND  MUTUAL  LIFE  INSURANCE  COMPANY 
Boston,  Massachusetts 

Extra  annual  premium  on  lives  already  insured  if  they  enter  military  or 
naval  service — None. 

Limit  of  new  insurance  written  upon  persons  enlisting  in  the  army  or 
navy — $2500. 

Ages  to  which  these  limits  apply — All  ages. 

Lowest-priced  form  of  policy  written — Ordinary  life. 

Extra  annual  premium  per  $1000  for  service — Army,  $100;  navy,  $100; 
volunteers,  $100;  conscripted,  $100. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
—$50. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None. 

Liability  of  company  if  extra  premium  is  not  paid— Premiums  paid. 

NEW  YORK  LIFE  INSURANCE  COMPANY 
New  York  City 

Limit  of  new  insurance  written  upon  persons  enlisting  in  the  army  or 
navy — $5000. 

Ages  to  which  these  limits  apply — All  ages. 

Lowest-priced  form  of  policy  written — Ordinary  life. 

Extra  single  premium  per  $1000  for  service  in  army  or  navy — $100. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
— None. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None. 


68  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

Time  when  extra  premiums  are  payable — Before  insured  leaves  United 
States  for  service. 

Liability  of  company  if  extra  premium  is  not  paid — On  policies  less  than 
$5000,  one-fifth  face  amount  of  policy:  on  policies  over  $5000,  return'  of 
premiums  paid  if  within  two  years. 

Period  during  which  extra  premium  is  payable — One  payment  only. 

MINNESOTA  MUTUAL  COMPANY 
St.  Paul,  Minnesota 

Lives  upon  which  no  new  insurance  will  be  issued — Members  of  navy, 
naval  reserve  or  aviation  corps. 

Extra  annual  premium  on  lives  already  insured  if  they  enter  such  serv- 
ice— $100. 

Limit  of  new  insurance  written  upon  persons  enlisting — ^$2000. 

Ages  to  which  these  limits  apply — All  ages. 

Lowest-priced  form  of  policy  written — Whole  life.  *■ 

Extra  annual  premium  per  $1000  for  service  in  army  or  navy — $100. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
— None. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None. 

Time  when  extra  premiums  are  payable — 31  days  after  entering  service. 

Liability  of  company  if  extra  premium  is  not  paid — Premiums  paid. 

Period  during  which  extra  premium  is  payabh — Duration  of  war. 

MISSOURI  STATE  LIFE  INSURANCE  COMPANY 
St.  Louis,  Missouri 

No  restrictions  are  placed  on  military  service  not  involving  aeronautics 
either  in  time  of  peace  or  war  within  the  continental  limits  of  the  United 
States  except  as  to  the  disability  benefits. 

Extra  annual  premium  for  service  outside  the  United  States — $100  per 
$1000  insurance. 

Limit  of  new  insurance — On  lives  under  thirty  years  of  age,  as  of  June  5, 
1917,  the  limit  is  $5000,  inclusive  of  any  insurance  issued  heretofore  by  the 
company  on  such  lives. 

Lowest  price  form  of  policy — Ordinary  life. 

Extra  premiums  are  payable  during  service,  and  the  liability  of  the  com- 
pany in  case  of  failure  to  pay  extra  premiums  shall  be  limited  to  the  reserve 
on  the  policy. 

MARYLAND  LIFE  INSURANCE  COMPANY 
Baltimore,  Maryland 

Extra  annual  premium  on  lives  already  insured  if  they  enter  military  or 
naval  service — Free  permit  for  one  year  from  April  9,  1917. 


EFFECT  ON  LIFE  INSURANCE  69 

Limit  of  new  insurance  written  upon  persons  enlisting — Do  not  accept 
applicants  already  in  service  or  who  contemplate  entering  service. 

Ages  to  which  these  limits  apply — Ages  below  31,  $2000;  ages  above  31  to 
36,  $5000. 

Lowest-priced  form  of  policy  written — Ordinary  life. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
— None ;  outside  of,  $100. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None. 

Time  when  extra  premiums  are  payable — Proportion  at  time  of  entering 
service  and  on  anniversary  thereafter. 

Liability  of  company  if  extra  premium  is  not  paid — Reserve. 

Period  during  which  extra  premium  is  payable — Continuously. 

EQUITABLE  LIFE  ASSURANCE  SOCIETY 
New  York 

Extra  annual  premium  on  lives  already  insured  "if  they  enter  military  or 
naval  service — None  prior  to  January  i,  1914. 

Limit  of  new  insurance  written  upon  persons  enlisting — $5000. 

Ages  to  which  these  limits  apply — All  ages. 

Lowest-priced  form  of  policy  written — Ordinary  life. 

Extra  annual  premium  per  $1000  for  service — 10  per  cent  of  face  policy. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
— None. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None. 

Time  when  extra  premiums  are  payable — On  entering  service. 

Liability  of  company  if  extra  premium  is  not  paid — Premiums  returned. 

GREAT  SOUTHERN  COMPANY 
Houston,  Texas 

Extra  annual  premium  on  lives  already  insured  if  they  enter  military  or 
naval  service — None. 

Limit  of  new  insurance  written  upon  persons  enlisting — Not  accepted. 

Lowest-priced  form  of  policy  written — Ordinary  life. 

Extra  annual  premium  per  $1000  for  service  in  army  or  navy — None. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
— None. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None. 

HOME  LIFE  INSURANCE  COMPANY 

New  York 

Lives  entering  into  military,  naval  or  aeronautic  service  upon  which  no 
new  insurance  will  be  issued — Special  hazards  treated  according  to  their 
merits. 


yO  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

Extra  annual  premium  on  lives  already  insured  if  they  enter  such  service — 
5  per  cent  for  overseas,  military  or  naval  service  in  old  form  of  policies ; 
10  per  cent  for  naval  service  or  overseas  military  service  in  new  policies. 

Limit  of  new  insurance  written  upon  persons  in  the  army — Commissioned 
officers,  $5000;  noncommissioned  officers,  $2000.  In  the  navy,  $2000  for  com- 
missioned and  warrant  officers ;  $1000  for  petty  officers  and  men. 

Ages  to  which  these  limits  apply — No  special  limits. 

Lowest-priced  form  of  policy  written — Whole  life. 

Extra  annual  premium  per  $1000  for  service  in  army — $100  outside  United 
States ;  navy,  $100. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
— Free  permit  at  present. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc.— Nil. 

Time  when  extra  premiums  are  payable — When  insured  embarks  for  naval 
service  or  overseas  military  service. 

Liability  of  company  if  extra  premium  is  not  paid — The  reservf. 

Period  during  which  extra  premium  is  payable — New  policy  provides  for 
an  extra  during  first  five  years. 

Conditions  as  to  existing  business — Previous  to  1907,  free,  by  company's 
ruling,  during  present  war;  1907  to  1916  and  over  a  year  in  force,  free  under 
the  contract. 

INTER-MOUNTAIN  LIFE  INSURANCE  COMPANY 
Salt  Lake  City,  Utah 

Lives  entering  into  military,  naval  or  aeronautic  service  upon  which  no 
new  insurance  will  be  issued — Those  who  already  carry  $2000  or  over  with 
the  company. 

Extra  annual  premium  on  lives  already  insured  if  they  enter  such  service — 
Old  policyholders,  no  restriction ;  new  policyholders,  $25  in  continental  limits. 

Limit  of  new  insurance  written  upon  persons  enlisting  in  the  army  or 
navy — $2000. 

Ages  to  which  these  limits  apply — 16  years  to  45. 

Lowest-priced  form  of  policy  written — Ordinary  life. 

Extra  annual  premium  per  $1000  for  service  in  army — $25  in  continental 
limits ;  navy,  not  assumed. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
—$25. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc.— $25. 

Time  when  extra  premiums  are  payable — On  entering  service. 

Liability  of  company  if  extra  premium  is  not  paid — Cash  value  of  reserve. 

Period  during  which  extra  premium  is  payable — First  ten  years  of  policy. 

Conditions  as  to  existing  business — No  restrictions. 


EFFECT   ON    LIFE   INSURANCE  7I 

GERMANIA  LIFE  INSURANCE  COMPANY 
New  York 

Lives  upon  which  no  new  insurance  will  be  issued — Members  of  regular 
army  or  navy  or  persons  in  aeronautic  or  submarine  service. 

Extra  annual  premium  on  lives  already  insured  if  they  enter  such  service — 
None  if  of  two  or  more  years'  standing. 

Limit  of  new  insurance  written  upon  persons  enlisting — Ages  21-23,  single 
men  $5000,  married  men  $7S00;  24-27,  $7500  and  $12,000,  respectively;  28-31, 
$10,000  and  $15,000,  respectively;  32  and  over,  company's  regular  limit  on 
one  life.    No  distinction  as  to  volunteers  or  conscripted  men. 

Lowest-priced  form  of  policy  written — Ordinary  life. 

Extra  annual  premium  per  $1000  for  service  in  army — $50  for  service  in 
war  outside  the  United  States ;  navy,  $50. 

Extra  annual  premium  per  $1000  for  service  in  continental  United  States 
— None. 

Extra  annual  premium  per  $1000  for  members  of  home  defense  leagues, 
etc. — None. 

Time  when  extra  premiums  are  payable — Within  31  days  of  entry  in  mili- 
tary or  naval  service  in  war. 

Liability  of  company  if  extra  premium  is  not  paid — One-tenth  face  of 
policy  first  year;  one-fifth  face  during  second  year. 

Period  during  which  extra  premium  is  payable — For  not  more  than  two 
years. 

The  Disability  Clause 

Inasmuch  as  many  life  insurance  companies  in  the  United 
States  had  in  their  poHcies  a  disabihty  clause,  it  was  necessary 
to  modify  this  clause.  The  disability  clause  provides,  in  brief, 
that  in  case  of  the  total  and  permanent  disability  of  the  insu'red, 
no  further  premiums  need  be  paid  and  the  insured  receives  either 
a  stated  sum  annually  for  a  certain  period,  or  a  single  sum.  Such 
a  clause  which  has  come  into  general  use  during  the  last  decade 
contemplated  the  disability  which  occurred  during  times  of  peace. 
It  manifestly  did  not  contemplate  the  hazard  of  disability  which 
is  so  prevalent  in  war  times.  The  following  new  clause  to  gov- 
ern disability  benefits  was  suggested  by  the  preceding  described 
committee : 

The  foregoing  provisions  for  waiver  of  premiums  [and  for  annuity  bene- 
fits] in  event  of  permanent  total  disability  [and  for  double  indemnity  in 
event  of  death  by  accident]  shall  become  null  and  void  if  the  insured  shall 


''12  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

engage  in  military  or  naval  service  in  time  of  war  [and  the  additional  pre- 
mium therefor  shall  cease  to  be  payable] ;  provided  that,  upon  the  presenta- 
tion after  the  termination  of  such  service  of  evidence  satisfactory  to  the 
company  that  the  insured  is  acceptable  for  the  said  additional  benefits,  said 
provisions  will  again  become  operative  [on  payment  of  the  additional  pre- 
mium aforesaid]. 

A  modification  was  also  made  necessary  in  what  is  called  the 
incontestable  clause.  This  clause  in  the  antebellum  period 
usually  provided  that  the  policy  was  absolutely  incontestable 
after  one  or  two  years  for  all  causes  except  the  nonpayment  of 
the  premium,  and,  in  some  companies,  for  fraud.  It  was  neces- 
sary to  add  to  the  above  exceptions  the  following  modification, 
"  or  for  the  violations  of  the  provisions  relating  to  military  or 
naval  service,"  *^ 

The  War  Clause  in  British  Life  Assurance  Companies 

The  practice  of  the  British  assurance  companies  before  Au- 
gust, 1 9 14,  in  respect  to  provisions  of  the  policy  in  case  of 
military  or  naval  service  was  but  little  less  liberal  than  that  of 
American  companies.  In  Great  Britain,  as  in  the  United  States, 
there  had  been  a  marked  liberalization  of  the  policy  contract, 
and  for  much  the  same  reasons,  although  legislative  enactments 
had  less  influence  in  accomplishing  this  result  in  England.  In 
both  countries,  however,  there  had  been  active  competition  among 
the  companies  for  business,  and  a  growing  confidence  among 
the  leading  classes  that  war  on  a  considerable  scale  among  civi- 
ized  nations  was  a  part  of  the  history  of  the  past.  The  English 
assurance  companies  issued  "  worldwide  policies  "  to  those  of 
settled  habits  and  of  an  age  of  30  or  over.  But  the  outbreak  of 
the  great  war  changed  the  situation.  The  British  offices  agreed 
to  undertake  without  any  extra  premium  full  liability  under 
policies  then  in  force  on  lives  of  civilians  who  volunteered  for 
active  war  service,  even  though  the  particular  policy  contract 
permitted  them  to  charge  an  extra  premium.  There  was  an 
exception  in  the  case  of  the  professional  soldiers  in  the  regular 


EFFECT  ON  LIFE  INSURANCE  73 

army.  This  was  the  general  practice.  Some  of  the  offices,  as 
in  the  case  of  the  companies  in  the  United  States,  had  retained 
a  fully  restricted  war  clause,  some  had  modified  it,  and  some 
had  abolished  it.  There  was,  as  in  most  countries,  a  disposition 
to  be  liberal  in  offering  this  patriotic  service,  notwithstanding 
that  the  added  burden  promised  might  be  a  heavy  one  for  the 
persisting  policyholders.  There  was  some  discussion,  as  in  the 
other  countries  at  war,  whether  the  added  cost  ought  not  to  be 
borne  by  the  government,  since  the  service  which  was  being 
rendered  and  which  occasioned  the  added  cost  was  one  for  the 
nation,  and  hence  should  be  borne,  not  by  a  part  of  the  nation — 
the  policyholders — but  by  the  whole  group  which  was  to  receive 
the  benefit  of  such  service. 

Soon,  however,  after  the  outbreak  of  the  war,  a  clause  was 
adopted  by  most  of  the  offices  to  cover  the  war  risk.  A  com- 
monly used  form  of  this  war  clause  in  Great  Britain  was  as 
follows : 

The  policy  will  be  void  if  the  assured  shall,  without  permission  of  the 
directors  (which  may  be  obtained  upon  payment  of  such  added  premium, 
either  single  or  recurrent,  or  in  such  reduction  of  the  sum  assured  as  the 
directors  may  think  proper),  take  part  in  any  naval  or  military  operations 
during  actual  warfare,  or  in  any  insurrection  or  any  expedition  or  operation 
of  a  warlike  character,  either  as  a  combatant,  or  citizen,  or  engage  in  any 
trade,  business  or  occupation,  involving  special  or  unusual  risk  to  life  or 
health,  unless  the  fact  of  such  engagement  be  mentioned  in  the  policy.' 

It  will  be  observed  that  the  above  war  clause  is  more  inclusive 
and  stringent  than  the  one  adopted  by  companies  in  the  United 
States.  It  has  been  stated  that  insured  civilian  risks,  entering 
the  war  service,  were  generally  not  charged  an  extra  premium. 

For  new  risks,  the  cost  was  frequently  made  by  many  com- 
panies at  7  guineas  on  the  hundred  annually.  This  rate  was 
largely  based  on  the  practice  and  experience  of  the  South  African 
War.  In  a  few  cases  plans  were  devised  to  spread  cost  over 
a  longer  period.  However,  a  few  months'  experience  in  the 
war  disclosed  that  such  plans  would  place  the  insurance  companies 

*  The  Insurance  Record,  London,  September  15,  1916. 


74  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

in  a  serious  condition.  The  rates  were  therefore  raised  and 
former  plans  abandoned.  Later  with  the  experience  of  the  war 
and  the  growing  realization  of  its  seriousness  with  respect  to 
length  and  destruction  of  Hfe,  the  rates  were  raised  to  lo  and 
15  guineas,  and  still  later  the  general  rate  became  20  guineas. 
In  addition,  the  net  risk  was  limited  to  £1000,  or  even 
less.  At  such  rates,  insurance  is  prohibitive  for  many  or  most 
persons,  especially  since  the  incomes  of  many  were  reduced  when 
they  entered  the  ranks  as  soldiers.  Many  companies  later  refused 
to  accept  war  risks,  and  issued  new  policies  only  subject  to  a 
restriction,  such  as  the  following:  "If  the  life  assured  should 
at  any  time  during  the  currency  of  this  policy  engage  in  aviation, 
or  in  any  military  service  outside  the  United  Kingdom,  or  in 
any  naval  service,  whether  at  home  or  abroad,  the  policy  will 
thereupon  become  void.  If  he  should  in  time  of  war  leave  the 
United  Kingdom  in  any  other  capacity,  the  policy  will  be  void 
unless  immediate  notice  be  given  to  the  company  and  such  extra 
premium  as  the  directors  may  require  be  forthwith  paid  to  the 
company."  The  companies  in  applying  this,  or  a  similar  clause, 
have  devised  plans  by  which,  instead  of  an  extra  premium,  a 
temporary  reduction  in  the  benefit  is  made.  Under  these 
arrangements  in  many  cases  the  amount  paid  at  death,  resulting 
from  war  or  naval  service,  is  the  amount  of  the  premiums  paid, 
or  in  some  cases  double  the  premiums  paid.  In  other  cases,  the 
sums  assured,  or  the  face  of  the  policy,  are  reduced  by  deiinite 
amounts  which  increase  with  each  year  of  service.  In  either 
case  the  policy  can  be  restored  to  its  full  amount  at  the  con- 
clusion of  peace,  by  complying  with  certain  conditions.  In  all 
cases  notice  of  departure  in  active  service  is  required.  In  most 
cases  the  companies  apply  their  conditions  to  the  aviation,  as 
well  as  to  the  military  and  naval  services;  and  some  companies 
have  special  clauses  applying  to  civilians  who  depart  to  zones 
of  warfare.  In  some  cases  the  directors  of  the  company  must 
be  satisfied  when  reinstatement  of  the  policy  to  full  benefits  is 
asked  with  respect  to  the  future  residence  and  occupation  of 
the  applicant. 


EFFECT    ON    LIFE   INSURANCE  75 

In  addition  to  these  general  and  special  restrictions,  many  of 
the  English  companies  grant  policies  under  these  limitations  only 
on  the  whole-life  plan,  or  on  a  limited  endowment. 

The  Scottish  Equitable  returns  the  premium  paid  if  death 
occurs  at  war  or  within  six  months  after  the  return  from  war. 

The  Atlas  pays  double  the  premium  as  a  settlement.  The 
Phoenix  reduces  the  sum  insured  one-tenth  during  the  first  year 
of  service,  and  increases  by  one-tenth  for  each  succeeding  year 
of  service  up  to  the  full  amount  assured.  Quinquennial  bonuses 
(dividends)  will  be  paid  in  the  case  of  participating  policies,  but 
no  interim  bonuses  (dividends)  are  paid  on  claims  by  death 
during  war  service. 

In  some  companies,  if  on  medical  examination  the  company 
is  not  satisfied  as  to  the  health  of  the  insured,  all  premiums  paid 
will  be  refunded.  Another  plan,  originated  by  the  Prudential, 
is  deserving  of  notice.  The  Prudential  quoted  extra  premiums 
for  war  risk,  ranging  from  8  to  15  guineas  per  cent  and,  if 
desired,  arranged  alternatively  for  a  conditional  reduction  of  the 
sum  insured.  But  it  also  had  a  special  plan.  For  all  ages  at  entry 
from  18  to  45,  endowment  insurance  for  15  years  could  be  pur- 
chased without  medical  examination  and  covering  war  service. 
The  premium  payable  was  £1  5s  for  each  £10  insured  during 
the  continuance  of  the  war,  and  12s  6d  per  £10  thereafter.  The 
plan  was  limited  to  policies  not  exceeding  £500. 

There  is  a  wider  divergence  among  the  war  risk  clauses  of 
the  British  life  insurance  companies  than  among  those  of  the 
American  companies  and  British  companies  are  charging  much 
higher  extra  premiums  than  the  American  companies. 

As  an  example  of  what  some  companies  there  deemed  neces- 
sary, it  was  pointed  out  that  three  of  them  had  reported  that 
their  extra  premiums  were  21  per  cent  of  the  face  of  the  policy 
per  year.  The  highest  rate  thus  far  put  forth  by  any  American 
company,  so  far  as  is  generally  known,  is  10  per  cent  per  year. 

The  Association  of  Life  Insurance  Presidents  in  191 7  ad- 
dressed a  communication  to  all  the  British  companies,  asking  for 
copies  of  their  war  clauses,  rates  and  mortality  experience,  in 


y6  EFFECTS    OF    THE    WAR   UPON    INSURANCE 

SO  far  as  they  were  able  or  willing  to  give  them.  Replies  were 
received  from  49  companies,  but  only  28  furnished  copies  of 
their  war  clause.  All  reported  that  no  systematic  attempt  had 
been  made  to  gather  mortality  statistics  as  yet,  all  being  too 
short  handed.  The  conditions  are  shown  by  reply  of  one  com- 
pany :  "  Generally  speaking,  staffs  on  this  side  are  so  short 
through  the  war — we  ourselves  having  lost  93  per  cent  of  our 
eligibles  and  likely  to  lose  more — that  it  is  impossible  to  under- 
take any  other  than  purely  pressing  necessary  work."  The 
replies  of  the  other  21  consisted  merely  of  printed  annual 
reports,  making  only  general  references  to  the  effect  of  the  war. 
The  most  notable  feature  of  the  replies  was  the  wide  variation 
in  the  wording  and  provisions  of  the  various  war  clauses  used. 
This  wide  divergence  made  any  exact  tabulation  impossible,  and 
even  the  facts  given  below,  for  exact  accuracy,  would  in  nearly 
every  case  need  some  qualification  or  modification.  In  a  rough 
way,  however,  the  following  tabulation  will  show  the  principal 
features  of  the  English  clauses: 

War  Clauses  Tabulated 

Number  of  companies  reporting  on  war  clause 28 

Companies  that  take  no  war  risks 6 

War  clauses  tabulated  22 

The  28  companies  whose  war  risk  regulations  are  tabulated 
wrote  £32,916,105  of  the  total  of  £83.462,829  new  issues  written 
by  the  89  British  companies  in  19 14,  or  about  39.45  per  cent 
■of  total. 

Application  to  Army 

Applies  on  entering  service 3 

Applies  on  leaving  Great  Britain 19  22 

Application  to  Navy 

Applies  on  entering  service 11 

Applies  on  going  afloat 5 

Applies  on  leaving  Great  Britain 6  23 


EFFECT   ON    LIFE   INSURANCE  'J'J 

Application  to  Aviators 

Applies  on  entering  service 8 

Applies  on  leaving  Great  Britain i 

Aviation  not  mentioned   13  22 

Continuous  Restrictions 
(Effect  of  service  without  consent) 

A.  Policy  becomes  void  4 

B.  Benefits  reduced : 

To  gross  premiums 2 

To  cash  surrender  value 2 

To  twice  amount  of  premiums  paid  during  war  and  one 

year  after '    i 

To  twice  amount  of  premiums  paid  during  war  and  six 

months  after  i 

To  twice  amount  of  premiums  paid  during  war* I 

To  one-tenth  of  face  of  policy  for  each  year  of  war  service  i 

Not  stated   5  17 

Restrictions  Limited 

(Limited  to  3  years 2) 

(Limited  to   5  years i) 

(Limited  to  duration  of  present  war 2) 

(Effect  of  service  without  consent) 

A.  Policy  becomes  void  2 

B.  Benefits  reduced: 

To  twice  amount  of  premiums  paid  during  war  and  one 
year  after  *    i 

To  percentage  of  all  premiums  paid  varying  from  one- 
third  on  whole  life  to  two-thirds  on  endowment i 

To  gross  premiums   i  5 

22 

Rates  for  War  Risk 

At  the  beginning  of  the  war  it  was  thought  that  the  experience 
of  the  Franco-Prussian  War  would  be  some  guide  and  rates 
of  5  per  cent  to  7  per  cent  in  addition  to  the  ordinary  rates  were 
fixed  accordingly,  but  it  was  soon  found  that  these  rates  were 
wholly  inadequate  and  they  were  raised  by  successive  stages  to 
those  quoted  below,  the  company  stating  in  each  case  that  rates 

'  As  all  war  clauses  now  in  use  have  been  adopted  since  the  beginning  of 
the  war,  there  is  no  accumulated  reserve  lost  in  such  cases  as  these. 


y8  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

quoted  were  those  then  in  force  and  hable  to  change  at  any  time, 
while  six  companies  had  withdrawn  altogether  from  insurance 
of  any  war  risks.  With  four  exceptions,  the  amount  of  the 
extra  war  premium  is  not  given  in  the  policy,  the  usual  expression 
being  "  such  extra  premium  as  the  directors  may  deem  necessary," 

Extra  Premium  for  War  Hazard  in  Addition  to  Regular  Premiums 

Number  of  companies  quoting  rates 12 

21  per  cent  of  face  of  policy  per  year 3 

20  per  cent  of  face  of  policy  per  year 3 

17.85  per  cent  of  face  of  policy  per  year i 

16.8  per  cent  of  face  of  policy  per  year  or  thereabouts i 

15-75  per  cent  on  endowment  only 2 

12.6  per  cent  of  face  of  policy  per  year i 

10  per  cent  on  15-year  endowments  only i  12 


Practice  in  France 

The  life  insurance  companies  in  France  had  in  general  a  war 
clause  in  their  policies  of  insurance  which  provided  that  the 
policy  was  not  forfeited  in  the  event  of  military  service,  even 
though  the  extra  premium  required  in  the  case  of  such  service 
was  not  paid.  If,  however,  the  insured  died  within  eight  months 
of  the  cessation  of  hostilities,  the  insurance  company  would  pay 
to  the  beneficiary  only  the  reserve  value  on  the  policy.  At  the 
suggestion  of  the  French  Government,  the  insurance  companies 
agreed  to  reduce  the  eight  months  limit  to  three  months  and 
also  agreed  to  distribute  among  the  insured  any  excess  of  the 
war  premiums  which  had  been  collected  to  meet  the  additional 
mortality  due  to  the  war.  This,  of  course,  takes  into  considera- 
tion only  the  deaths  which  occur  immediately,  or  in  a  brief 
period  as  a  result  of  the  war.  It  leaves  out  of  consideration 
that  excess,  suspended  mortality  which  occurs  or  culminates  as 
a  result  of  the  war,  some  time  after  its  cessation.  The  impaired 
vitality  which  results  from  war  service  will  be  prolonged  for 
a  time,  and  certainly  no  period  such  as  three  or  even  eight  months 
will  embrace  all  this  mortality  or  probably  even  a  majority  of  it. 
Such  mortality  will  extend  over  a  long  period  of  years.     It  will 


EFFECT   ON    LIFE   INSURANCE  79 

of  course  be  quite  impossible  to  determine  in  the  case  of  that 
mortality  which  results  some  time  after  the  war  closes,  what 
part  of  it  has  been  due  to  war  service,  and  what  part  has  been 
due  to  the  other  factors  affecting  vitality.  There  is  little  doubt 
that  the  vitality  of  those  engaged  in  this  war  will  be  greatly 
decreased  in  many  cases,  just  as  has  been  the  case  in  former  wars. 
It  may  well  be  true  that  an  impairment  of  the  vital  forces  will 
not  be  as  common  in  this  great  war  as  in  earlier  wars,  due  to 
the  fact  that  weapons  of  warfare  are  more  directly  fatal  and 
that  the  soldier  is  better  cared  for;  that  is,  better  clothed,  fed, 
and  cared  for  in  medical  and  sanitation  matters.  The  advance 
in  medical  science  will  also  contribute  to  this  end.  However,  it 
doubtless  remains  true,  when  all  allowance  for  the  above  stated 
considerations  is  made,  that  war  places  a  great  tax  on  the  vitality 
of  the  combatants.  Sentiments  of  patriotism  and  ignorance  of 
actual  living  conditions  surrounding  war  often  are  responsible 
for  an  exaggeration  of  the  beneficial  physical  effects  of  service 
in  the  army  and  navy.  It  is  argued  that  the  outdoor  life  and 
back-to-nature  living  has  a  wonderful  positive  effect  on  the  health 
of  the  soldier  and  sailor,  especially  for  those  who  have  lived  in 
cities  and  spent  their  working  hours  in  offices  and  shops.  Doubt- 
less there  are  in  the  case  of  many  single  individuals  these  positive 
factors  on  their  health  and  vitality,  but  there  are  certain  very 
important  negative  factors  to  counterbalance  and  even  overcome 
these  positive  ones.  From  a  standpoint  of  vitality,  the  effect  on 
the  whole  group  must  be  considered,  and  not  what  happens  to 
certain  individuals.  Warfare  can  not  be  justified  on  the  basis 
of  its  good  effects  on  human  vitality. 

Practice  in  Austria-Hungary 

In  Austria-Hungary,  the  practice  of  the  life  insurance  com- 
panies in  their  treatment  of  war  risks  differed  considerably. 
There  was  an  inclination  at  first  on  the  part  of  many  companies 
to  make  a  distinction  between  the  Landwehr  and  the  Landsturm. 
A  number  of  the  companies  assumed  the  war  risk  for  the  full 


8o  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

amount  of  the  policy,  without  any  extra  premium  up  to  a  certain 
maximum  amount  of  insurance,  although  there  was  a  distinction 
sometimes  made  in  this  connection  between  the  Lapdwehr  and  the 
Landsturm.  The  maximum  amount  of  insurance  for  which  the 
company  agreed  to  be  liable  was  in  neither  case  in  excess  of 
$6,000.  The  full  risk  was  assumed  in  soine  companies  by  the 
payment  of  an  extra  premium.  In  the  case  of  a  number  of 
companies,  the  full  risk  was  assumed  to  one-half  the  face  of 
the  policy,  which,  of  course,  amounted  to  a  reduction  in  the 
risk  for  the  company,  although  not  necessarily  to  a  one-half 
reduction.  Other  companies  refused  to  assume  any  part  of  the 
war  risk  without  an  extra  premium,  although  they  allowed  in 
general  the  reserve  value  of  the  policy  in  case  of  death. '^  This  al- 
lowance of  the  net  reserve  value  on  the  policy  in  case  of  death  in 
military  service  was  a  general  practice  of  the  life  insurance  com- 
panies. This  amount,  as  is  well  known  to  all  elementary  students 
of  insurance,  represents  little  or  no  risk  on  the  part  of  the  com- 
pany, except  in  a  strictly  technical  sense.^ 

It  is  not  necessary  to  review  further  the  practice  of  life  insur- 
ance companies  in  the  remaining  nations  at  war  with  respect  to 
their  policy  contracts  before  and  after  the  war,  as  it  applied  to 
those  who  entered  service.  The  procedure  in  their  cases  was 
practically  the  same  as  in  the  countries  whose  practices  have 
been  described. 

To  summarize  the  situation  we  find : 

First,  that  it  had  become  a  practice  with  many  companies, 
preceding  the  war,  to  withdraw  completely,  or  very  decidedly 
modify,  the  clause  in  the  policy  which  prevented  military  or 
naval  service. 

Second,  that  other  companies  retained  it,  but  applied  it  very 
liberally. 

Third,  that  at  the  outbreak  of  the  war  there  was  a  general 
disposition  on  the  part  of  the  companies  not  to  demand  of 
civilians  who  entered  the  service  and  who  had  policies  of  insur- 
ance that  they  pay  an  extra  premium. 

^  Transactions  Actuarial  Society  of  America,  vol.  xvi,  1915. 


EFFECT    ON    LIFE   INSURANCE  8l 

Fourth,  that  the  companies  very  generally  adopted  a  war 
clause  and  demanded  an  extra  premium,  often  a  practically  pro- 
hibitive one  for  the  insurance  of  persons  who  entered,  or  con- 
templated entering,  the  war  service. 

Fifth,  that  some  companies  refused  to  insure  such  risks  on 
any  terms. 

Sixth,  that  some  companies  made  a  distinction  between 
domestic  and  foreign  service  and  also  between  classes  of  service, 
such  as  aerial,  submarine,  and  ordinary  war  service. 

Seventh,  that  even  though  policies  of  insurance  were  granted, 
the  amount  on  a  single  life  was  limited,  as  well  as  the  kind  of 
policy  which  might  be  obtained. 

Eighth,  that  the  amount,  charged  for  this  extra  mortality 
hazard  differed  widely  among  the  companies  in  the  same  country 
and  between  the  companies  in  different  countries,  because  of  the 
fact  that  no  adequate  actuarial  bases  were  at  hand  to  determine 
what  the  charge  should  be.  Most  of  the  companies  in  the  United 
States  adopted  the  military  and  naval  service  restriction  clause 
for  a  period  of  five  years  after  the  issuance  of  the  policy,  instead 
of  ten,  as  was  recommended  by  the  committee  of  the  Association 
of  Life  Insurance  Presidents.  This  may  have  been  due  in  part 
to  the  belief  that  the  war  would  be  well  over  by  this  time,  and 
in  part  to  the  belief  that,  as  a  result  of  the  war,  there  would  be 
compulsory  military  service.  In  this  latter  event,  such  military 
and  naval  forces  as  were  engaged  in  active  service  would  be 
composed  primarily  of  men  too  young  to  have  assumed  the 
larger  responsibilities  of  life,  and  hence  in  the  majority  of  cases 
had  not  become  applicants  for  life  insurance. 

The  Effect  on  the  Finances  of  Life  Insurance 
Companies 

The  chief  effects  of  the  war  on  the  finances  of  life  insurance 
companies  may  be  discussed  as : 

(a)  effects  on  the  premium  income; 

(b)  the  depreciation  in  the  securities,  held  by  the  companies; 

(c)  the  increased  taxation  of  life  insurance. 


82  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

Effect  on  Premium  Income 

The  introduction  of  the  war  risk  clause  has  already  been 
discussed  and  its  direct  efifects  on  the  premium  income  are 
apparent.  Whether  the  additional  premium  collected  will  be 
sufficient  to  meet  the  costs  of  the  increased  hazard  and,  therefore, 
constitute  a  permanent  increase  or  strengthening  of  the  assets 
of  the  company,  only  later  experience  can  disclose.  The  excess 
mortality  may  place  a  strain  on  the  reserves  of  the  companies 
which  will  not  be  met  by  these  increases  in  the  premium.  It 
is  also  possible  that,  as  the  war  continues  and  economic  condi- 
tions in  the  countries  become  more  pressing,  the  demand  for 
loans  may  be  increased  and  this  may  unfavorably  *affect  the 
finances  of  the  companies.  Up  to  the  close  of  1916,  there 
seemed  to  be  no  evidence  that  the  demand  for  loans  on  account 
of  the  war  was  increasing;  nor  is  there  so  far  any  decided 
evidence  of  an  increase  in  lapses  and  a  demand  for  cash  sur- 
render values  on  policies.  Either  of  these  conditions  would 
unfavorably  affect  the  finances  of  the  life  insurance  companies. 

Another  condition  already  prevailing  to  a  limited  degree  and 
to  a  certain  extent  promised  to  be  of  wider  application,  if  the 
war  should  continue  long,  is  the  moratorium  for  soldiers  and 
sailors  in  the  case  of  insurance  premiums.  This  might  very 
seriously  affect  the  finances  of  the  companies.  In  England,  as 
early  as  August,  1914,  Parliament  passed  an  act  preventing  the 
lapse  of  any  policy  of  insurance,  except  after  a  due  application 
to  the  court.  The  act  applied  to  life  and  endowment  policies 
for  an  amount  not  exceeding  £25,  or  payments  equivalent  thereto, 
the  premiums  in  respect  to  which  are  payable  at  not  longer  than 
monthly  intervals,  "  and  had  been  paid  for  at  least  two  years 
preceding  August  4,  1914."  ^  This  act  was  intended  to  apply  to 
industrial  policies  of  insurance  in  particular.  The  court  was 
given  absolute  discretion  in  the  matter,  and  if  on  application  of 
the  insurer  for  a  lapse  of  the  policy,  it  should  appear  that  the 
failure  to  pay  the  premium  was  due  to  circumstances  attributed 

*  Acts  of  Parliament,  Chapter  78,  Manual  of  Emergency  Legislation. 


EFFECT   ON   LIFE   INSURANCE  83 

directly  or  indirectly  to  the  war,  the  court  might  "  by  order  stay, 
execute  or  defer  the  operation  of  any  such  remedies  as  afore- 
said— distress,  taking  possession  of  property,  et  cetera — for  such 
time  and  subject  to  such  conditions  as  the  court  thinks  fit." 

In  the  United  States  a  bill  with  a  much  wider  scope  and 
known  as  the  Soldiers'  and  Sailors'  Civil  Rights  Bill  has  passed 
the  House  of  Representatives  and  was  under  consideration  by 
the  Senate  at  the  close  of  the  special  session  in  October.  The 
bill  prevents  the  enforcement  of  the  ordinary  legal  claims  for 
pecuniary  obligations  against  the  soldiers  and  sailors  during  their 
absence  in  the  service  of  the  nation.  The  general  purpose  is  to 
protect  the  family  and  dependents  against  the  many  hardships 
which  would  result  from  enforcing  the  ordinary  legal  claims 
for  rent,  food,  clothing,  and  other  necessaries  of  life.  The  con- 
nection with  life  insurance  is  evident.  Under  such  a  law  a 
company  could  not  enforce  payment  of  the  premium,  nor  could 
the  policy  be  lapsed  for  the  ordinary  failure  to  pay  premiums 
when  they  are  due.  The  adjustment  of  the  overdue  premiums 
is  postponed  to  a  period  after  the  soldier  or  sailor  returns  to 
civil  life. 

Such  a  procedure  would  doubtless  serve  the  ends  of  abstract 
justice  so  far  as  these  individual  policyholders  are  concerned, 
but  the  circumstances  are  not  so  simple  as  might  at  first  be 
supposed.  The  life  insurance  companies,  as  has  been  shown, 
depend  upon  a  volume  of  current  premium  receipts  to  pay  to  a 
certain  extent  the  daily  maturing  claims.  It  does  not  keep  its 
funds  locked  up  in  a  strong-box,  but,  on  the  contrary,  has  them 
invested  in  long-time  investments  which  by  their  interest 
accumulations  reduce  the  cost  of  insurance  for  all  policyholders. 
If  this  moratorium  principle  should  be  generally  adopted  in 
the  various  countries  at  war  and  used  by  large  numbers  of 
policyholders  as  a  means  of  defaulting  their  insurance  premiums, 
serious  consequences  might  result  to  the  business  of  life  insur- 
ance. Even  from  the  standpoint  of  the  individual  policyholder 
who  is  to  be  served,  the  gain  would  not  be  a  clear  one.  Nothing 
so  contributes  to  lapses  and  surrenders  as  back  premiums.     It 


84  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

engenders  a  state  of  mind  in  the  policyholder  favorable  to 
lapsing.  If  several  back  premiums  are  due,  the  sacrifice  neces- 
sary to  be  made  to  pay  them  seems  either  too  difficult  or  scarcely 
worth  while,  and  the  policy  is  permitted  to  lapse. 

The  most  superficial  acquaintance  with  the  multiplicity  of 
forms  of  life  insurance  that  have  been  developed  in  this  country, 
and  of  the  conditions  affecting  the  status  of  great  classes  of 
policies,  is  enough  to  make  clear  the  necessity  of  the  most  expert 
handiwork  in  devising  a  moratorium  in  respect  of  life  insurance 
premium  payments  which  will  not  bring  about  incalculable 
harms  in  all  directions.  It  is  self-evident  to  the  life  insurance 
expert  that  the  adjustment  of  a  moratorium  to  term  policies, 
for  example,  should  be  quite  different  from  the  adjustment  to 
ordinary,  life  policies,  and  this  again  from  the  adjustment  to 
endowment  policies.  Policies  without  restriction  as  to  the  war 
risk  should  be  treated  in  one  way,  those  with  a  restriction  in 
another  way,  and  those  carrying  an  additional  war  risk  premium 
in  still  a  third  manner.  The  age  of  the  policy  and  the  amount 
of  the  reserve  accumulated  against  it  is  an  all-important  factor; 
and  even  more  important  is  the  proportion  of  the  reserve  that 
has  already  been  drawn  down  by  the  insured  as  a  policy  loan. 
A  sound"  and  beneficial  moratorium  affecting  the  payment  of 
life  insurance  premiums  should  take  all  these  matters  into  con- 
sideration; otherwise  it  runs  the  risk  of  producing  unsuspected 
effects  of  the  most  harmful  character. 

The  Depreciation  in  the  Securities  of  Life  Insurance  Companies 

One  of  the  most  important  effects  of  the  war  on  life  insurance 
is  the  depreciation  which  has  occurred  in  the  securities  in  which 
their  funds  are  invested.  It  is  well  known  that  a  life  insurance 
organization  is  one  which  accumulates  large  funds,  held  in 
reserve  on  account  of  the  practice  of  paying  for  the  cost  of  the 
insurance  by  a  level  premium,  instead  of  paying  by  a  premium 
the  annual  cost  of  insurance.  The  officials  of  the  companies  are, 
therefore,  occupying  the  positions  of  trustees  for  these  large 


EFFECT   ON   LIFE   INSURANCE  85 

sums  which  have  been  advanced,  or  which  are  held  in  the  case 
of  instalment  payment  of  matured  policies  for  periodic  pay- 
ments to  the  beneficiary.  There  is  little  need  for  the  life  insur- 
ance company  to  hold  a  large  amount  of  this  reserve  fund  in 
cash,  since  the  current  receipts  of  premiums  and  the  maturing 
interest  on  invested  funds  supply  a  considerable  amount  of  cash 
from  which  to  pay  current  liabilities.  The  officials  are,  there- 
fore, seeking  all  the  time  to  invest  these  funds  in  securities 
maturing  at  a  distant  date  and  bearing  a  satisfactory  rate  of 
interest.  That  is,  the  assets  are  not  primarily  liquid,  and  security 
of  the  investment  is  the  first  test  to  apply  in  deciding  on  an 
investment  for  a  life  insurance  company.  The  laws  in  many 
cases  limit  the  character  of  the  investrnents  and  also  require 
from  time  to  time  a  valuation  of  the  assets.  Prudence  on  the 
part  of  the  officials  is  thus  supplemented  by  legislative  require- 
ments. Bonds,  mortgages,  and  other  high  grade  securities  of 
governments,  transportation  companies,  and  other  industrial  con- 
cerns embrace  the  major  portion  of  the  investments  of  the  life 
insurance  companies.  When  the  valuation  of  the  assets  of  the 
companies  is  made,  the  appreciation  or  depreciation  of  these 
securities  has  an  important  bearing  on  the  financial  condition 
of  the  company.  In  the  United  States,  the  requirements  govern- 
ing the  valuation  of  the  assets  are  made  by  the  separate  states, 
but  are  similar.  In  all  cases  each  company  must  have  on  hand 
assets  at  least  equal  to  the  contractual  liabilities  under  the 
policies.  Since  it  is  the  market  value  or  quoted  value  of  the 
securities  at  the  time  of  valuation  which  is  usually  considered, 
a  fall  in  security  values  affects  directly  the  assets  of  the  life 
insurance  companies.  In  the  United  States,  there  has  been  no 
such  marked  depreciation  in  the  securities  of  the  life  insurance 
companies  as  in  the  case  of  some  of  the  European  nations.  It 
is  true  that  because  of  the  generally  disturbed  conditions  in  the 
country,  due  in  part  to  the  war,  certain  securities  of  the  com- 
panies in  the  United  States  had  been  aflfected.  But  the  deprecia- 
tion in  other  particulars  was  due  to  other  causes,  such,  for 
example,  as  the  fall  in  value  of  many  of  the  railway  securities, 


86  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

due  to  the  period  of  depression  in  United  States  railways.  Not 
a  small  factor  in  contributing  to  the  depression  in  security  values, 
both  in  the  United  States  and  abroad,  has  been  the  situation  on 
the  stock  exchanges.  The  closing  of  these  exchanges  for  a  time 
and  the  restricted  basis  on  which  trading  was  done — all  of  which 
was  a  result  of  the  disturbance  in  security  values — affected  the 
life  insurance  companies.  The  financial  dislocations  due  to  the 
war  were  worldwide.  The  large  holdings  of  American  securities 
in  Europe  and  the  shifting  of  their  control  and  ownership  greatly 
affected  their  value. 

It  is  quite  true  that  the  assets  of  life  insurance  companies  have 
not  in  some  cases  been  unfavorably  affected  by  the  condition 
of  the  security  market.  Indeed,  in  the  case  of  some  investments, 
the  war  has  had  no  effect.  The  following  table  shows  the  dis- 
tribution of  the  assets  of  life  insurance  companies  at  the  close 
of  1916,  as  reported  to  the  Insurance  Superintendent  of  New 
York: 


Real   estate $149,784,474.02 

Bonds  and  mortgages  1,651,012,014.11 

Stocks  and  bonds 2,377,982,416.97 

Collateral  loans    '.  9,798,501.64 

Loans  on  policies  to  policyholders 693,054,070.20 

Premium  notes  and  loans  29,236,824.53 

Cash  in  office,  banks  and  trust  companies 84,862,298.82 

Deferred  and  uncollected  premiums 69,325,493.69 

All  other  assets  79,568,383.39 

The  following  table  indicates  the  price  movements  since  the 
outbreak  of  the  war  of  a  selected  number  of  bonds  of  corpora- 
tions of  the  United  States : 


Price  Movement  of  40  Bonds 

High  Low 

1917 89.48  Jan.  86.68  Mar. 

1916 89.48  Nov.  86.19  Apr. 

1915 87.62  Nov.  81.51  Jan. 

1914 89.42  Feb.  81.42  Dec. 

1913 92.31  Jan.  85.45  Dec. 


EFFECT  ON  LIFE  INSURANCE  87 

It  will  be  observed  that  there  has  been  a  general  fall  in  these 
prices.    This  fact  is  further  made  clear  by  the  following  table : 

Rate  of  Yield  Rate  of  Yield 

Percentage  Percentage 
Indus-       Rail-  Indus-         Rail- 
trial         road  trial           road 
Year                                  Bonds      Bonds  Year                                     Bonds       Bonds 

1903 569         410  1911 5-17         4-21 

1904 5-8i  405         1912 5.18  4.26 

1905 S.19  3-91  1913 S-40  4-49 

1906 5.18  4.01  1914 572  4-53 

1907 576  4.30  1915 5-12  4.72 

1908 5-90  4-30  1916 5-25  4-54 

1909 5-i6  408  1917  (asof  June  i)  5.23  4.91 

1910 5-25  4-21 

This  list  of  the  rates  of  yield  of  ten  selected  industrial  bonds 
and  of  twenty  selected  railroad  bonds  covering  the  past  fifteen 
years,  shows  that  not  only  have  railroad  bonds  pretty  steadily 
declined  so  that  bonds  which  yielded  4.10  per  cent  in  ipoj 
declined  in  June  of  this  year  to  a  price  showing  a  yield  of  4.91 
per  cent,  but  also,  what  is  very  significant,  that  the  industrial 
bonds,  which  at  the  beginning  of  the  period  showed  a  yield  of 
5.69  per  cent,  during  the  same  period  increased  in  price  so  that 
on  June  i  of  this  year  they  were  selling  at  a  price  showing  a 
yield  of  5.23  per  cent. 


War  Finances  of  English  Companies 

In  England  the  life  assurance  companies  have  also  been  af- 
fected by  the  depreciation  of  securities.  It  is  not  possible  to 
form  a  close  estimate  of  the  amount  of  this  depreciation  in  all 
cases.  The  companies  are  required  to  make  a  quinquennial  valua- 
tion of  their  assets,  but  the  Board  of  Trade  permitted  the  com- 
panies to  use  the  values  at  the  end  of  1913;  but  since  many 
offices  value  at  other  times  also,  it  is  difficult  to  separate  the 
causes  of  depreciation  due  to  the  war  and  those  due  to  causes 
preceding  the  war. 

Mortgages,  loans  on  rates,  property  and  ground  rents,  life 
interests,  reversions,  and  various  other  securities  are  valued  in 


88  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

different  ways  since  the  war,  and  are  affected  in  different  degrees 
by  the  war.  It  will  be  understood  from  the  above  statement 
that  the  assets  of  English  life  companies  are  invested  in  many 
more  different  kinds  of  securities  than  is  the  case  with  American 
companies. 

The  heavy  depreciation  in  security  values  made  such  inroads 
into  the  surpluses  of  the  English  companies  that  practically  all 
of  them  had  to  reduce  their  rate  of  dividends,  and  in  some  cases 
no  dividends  were  declared.  Some  of  them  assumed  a  higher 
future  rate  of  interest,  and  thus,  for  the  time  being,  modified 
the  result  of  the  valuation  on  the  old  basis.  The  surplus  was 
thus  protected,  but  there  is  some  danger  in  such  a  plan.  There 
is  no  assurance  that  the  normal  amount  of  new  income  from 
premiums,  old  or  new,  will  be  received  during  the  war,  and  the 
securities  held  could  not  profitably  be  marketed  in  large  amounts 
and  the  proceeds  invested  in  the  new  and  higher  interest-bearing 
securities  which  were  being  placed  on  the  market.  Many  of  the 
companies,  as  in  the  United  States,  had  assumed  a  very  moderate 
rate  of  interest  in  calculating  their  premiums,  and  hence  earned 
an  actual  rate  of  interest  well  above  it.  This  made  possible 
large  additions  to  the  surplus  and  for  the  distribution  of 
dividends.    The  situation  is  presented  by  a  writer  as  follows :  ^ 

But  the  latest  Budget  proposals  have  made  the  most  cautious  valuations 
appear  none  too  stringent,  owing  to  the  fact  that  in  the  case  of  life  insur- 
ance companies  the  income  tax  is  levied  not  upon  the  profits  of  the  business, 
but  upon  the  investment  income.  Broadly  speaking,  a  life  insurance  society, 
when  investigating  its  financial  position,  ascertains  what  amount  of  invested 
funds,  derived  from  the  balance  of  unexpended  premiums  received  in  the 
past,  will  produce  an  income  sufficient,  when  added  to  the  premiums  still  to 
be  received  under  its  existing  contracts,  to  meet  the  liabilities  under  these 
contracts  as  they  fall  due.  The  amount  by  which  the  actual  funds  in  hand 
exceed  the  estimated  amount  so  determined,  is  regarded  as  surplus.  As  the 
whole  of  the  investment  income  of  a  life  insurance  company  is  subject  to 
income  tax,  an  increase  in  the  rate  of  the  tax  is  equivalent  to  a  reduction 
of  the  future  income  which  it  may  assume  it  will  receive,  and  as  a  com- 
pany's liabilities  in  respect  of  the  face  value  of  its  policies,  both  with-profit 
and  non-profit,  remain  unchanged,  the  effect  is  to  throw  the  whole  burden  of 
the  increased  taxation  upon  the  surplus  available   for  the  bonuses  of  the 

'  The  Economist,  London,  vol.  Ixxxiii,  1917. 


EFFECT  ON  LIFE  INSURANCE  89 

with-profit  policyholders.  Consequently,  the  popularity  of  the  with-profit 
policy  appears  to  be  gravely  threatened,  while  those  offices  which  in  the  past 
have  cut  their  non-profit  rates  down  to  very  low  figures  may  find  that  they 
can  not  afford  to  be  as  liberal  as  they  thought  they  could. 

It  may  be  argued  that,  whereas  very  few  offices  assume  an  average  future 
rate  of  interest  in  excess  of  3  per  cent  per  annum,  an  ample  margin  is  pro- 
vided by  the  fact  that  they  can  now  invest  money  in  safe  securities  to  return 
5  per  cent  or  more.  But  the  bulk  of  their  funds  has  not  been  invested 
upon  such  good  terms,  and  in  not  many  offices  more  than  4^  per  cent 
upon  the  whole  of  their  funds.  The  present  rate  of  tax  reduces  4^  to 
3H  per  cent  for  life  insurance  purposes,  and  ^  per  cent  is  an  extremely 
narrow  margin  out  of  which  to  provide  for  the  bonuses  which  every  with- 
profit  policyholder  has  a  right  to  expect  in  return  for  the  substantially 
higher  premium  he  pays. 

But  for  the  tremendously  strong  position  in  which  most  life  insurance 
companies  have  stood  until  now  as  the  result  of  their  sound  and  cautious 
management  in  the  past,  the  situation  would  be  intolerable.  If  any  appre- 
ciable part  of  their  funds  had  been  locked  up  in  securities  which  had 
defaulted  owing  to  the  war,  or  to  any  other  cause,  the  inequity  of  the  present 
system  of  assessment  would  have  brought  itself  so  prominently  before  public 
notice  as  to  call  for  immediate  relief.  As  it  is,  the  very  strength  of  the  com- 
panies makes  reform  the  more  difficult  to  secure. 

The  trouble  arises  partly  from  the  fact  that  the  greater  part  of  the  tax 
is  collected  by  deduction  at  the  source,  and  therefore  any  relief  has  to  be 
by  way  of  repayment — always  a  matter  of  difficulty.  In  the  case  of  banks 
who  subscribed  very  largely  to  the  414  per  cent  war  loan,  a  somewhat 
similar  situation  was  recognized  and  relieved  in  the  second  Finance  Act 
of  1915,  which  provided  that  a  bank  might  include  interest  on  war  loan  as 
part  of  its  profits  instead  of  being  taxed  by  deduction  at  the  source,  thus 
preventing  a  larger  total  payment  of  income  tax  than  would  be  represented 
by  the  assessment  of  its  total  profits.  Some  alteration  of  the  system  of 
assessment  of  life  insurance  companies  is  certainly  called  for. 

The  following  table  shows  for  the  leading  English  assurance 
companies  the  depreciation  in  their  assets,  based  upon  the  valua- 
tion of  19 14  and  1915.^ 

*  the  Economist,  London,  February  24,  1917.  vol.  Ixxxiv,  No.  3835. 


90 


EFFECTS    OF   THE   WAR   UPON    INSURANCE 


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EFFECT   ON   LIFE   INSURANCE  9 1 

It  will  be  observed  that  there  was  a  marked  tendency  to  transfer 
large  amounts  to  the  investment  reserve,  so  that  a  final  disposi- 
tion of  these  funds  could  be  made  when  the  financial  situation 
has  become  less  complex.  These  transfers  to  the  reserve  were 
required  for  the  purpose  of  writing  down  the  securities  to  the 
market  value  at  the  time  of  the  valuation. 

In  order  that  a  general  idea  of  what  this  depreciation  means 
for  the  assurance  companies  which,  as  has  been  stated,  have 
their  funds  widely  distributed,  the  following  table  of  the  leading 
English  securities  is  given  for  various  years.  ^ 

The  following  is  a  table  which  indicates  the  course  of  government 
securities : 

Average  Price 

Jan.-July             Average  Present 

1914  1915  1916  Price 

British  Consols ^7  62  58^  55 

India  3'/^  per  cent  (193O 88^4  82  tz  66 

Transvaal  3  per  cent  (1923-53)...              92  88  76  67 J^ 

Canada  3  per  cent  (1938) 85  84  74  68 

NewSouthWales4per  cent  (1933)             looj^  97  88  82 

The  aggregate  par  value  of  above  five  bonds  is  $3,300,000,000.  The  decline 
in  their  total  market  value  since  1914  amounts  to  more  than  $675,000,000. 
All  listed  government  and  colonial  bonds  and  debentures  have  declined  pro- 
portionately with  the  decline  shown  in  the  table.  Total  listings  of  govern- 
ment and  colonial  loans,  not  including  war  loans,  other  than  the  zV-i  per 
cent  loan  of  1914,  amount  to  $9,000,000,000.  During  the  three  year  period 
of  war  they  have  declined  in  market  value  approximately  $2,000,000,000  or 
22  per  cent. 

British  investments  in  the  foreign  railway  field  have  been  very  large. 
Practically  the  entire  railway  mileage  of  South  America  is  under  British 
management  and  control  and  British  interests  spread  to  Africa,  the  Far 
East  and  throughout  the  entire  Colonial  Empire.  The  following  shows  the 
course  of  six  overseas  railroad  stocks: 

Average  Price 

Jan.-July    Average    Present 
1914  1916         Price 

Buenos  Aires  Great  Southern  Ry.  (Ord.)..  in               82  73 

Central  Argentine   Ry.    (Ord.) 100               76  58 

Rhodesia  4  per  cent  Debentures 85               68  62 

Grand  Trunk  Ry.  of  Canada   (Ord.) 20               loj^             ^^^ 

Grand  Trunk  Ry.  of  Canada  Guar.  4  per  cent  83  63  59 

Bengal  &  North  Western  (India),  (Ord.)..  154  I2l  US 

*  Journal  of  Commerce,  October  19,  1917. 


92 


EFFECTS    OF    THE    WAR    UPON    INSURANCE 


The  aggregate  par  value  of  the  above  six  stocks  and  debentures  is 
$480,000,000.    The  decline  in  market  value  of  these  stocks  is  $135,000,000. 

The  shares  of  the  larger  banks  of  Great  Britain  are  favored  forms  of 
investment  with  the  British  public  and  enjoy  considerable  activity  on  the 
stock  exchange.  Quotations  of  four  of  the  most  important  bank  stocks  are 
shown  in  the  following  table : 


Paid  in 
Lloyds  Bank £8 


London  City  &  Midland 

London  County  &  Westminster 
Union  of  London  &  Smith's.. 


2.10S 


15.10S 


Jan.-JuTy 

Average 

Present 

1914 

1916 

Price 

£30 

24^ 

£24 

(375%) 

(300%) 

9^ 

7^ 

7/2 

(390%) 

(300%) 

2I>4 

IS 

H'A 

(430%) 

(290%) 

34 

24^ 

23/2 

(221%) 

(152%) 

The  aggregate  par  value  of  the  above  bank  shares  is  abou^  $400,000,000. 
Their  decline  since  1914  has  exceeded  $100,000,000,  or  25  per  cent  of  the 
total  market  value  before  the  war.  Of  the  forty  leading  banks  whose  shares 
are  listed  in  London,  thirty-six  have  declined,  and  four,  all  of  which  are 
doing  business  abroad,  have  advanced,  all  of  these  advances  being  nominal. 

The  iron,  coal  and  steel  ordinary  stocks  form  a  class  of  securities  which 
has  naturally  profited  from  the  war.  Iron  and  steel  companies  have  given 
their  almost  undivided  attention  to  government  business  and,  as  most  of 
these  concerns  are  running  twenty-four  hours  a  day,  substantial  increases  in 
profits,  despite  higher  raw  material  costs,  have  been  realized.  Quotations  of 
six  of  the  most  important  of  these  shares  follow : 


Par  of  Average  Prices 

Shares  Jan. -July,    1914 

Armstrongs    £1  40s  6d     202 J/2 

Babcock    &    Wilcox 

(British) i  2^       287^/2' 

Pease  &  Partners   . .           10  13            130 

Powell-Duffryn    Coal            i  2^       262^ 

Vickers    (Ord.)    I  37           185 

John    Brown   &    Co., 

Ltd I  21           105 


Average 
1916 

39s 

234 
IS 

3% 
37 

24 


Present 
Price 

% 


39s 

3^ 
16 

38s  3d 

34 


195 

312 
160 
■275 
191 

170 


The  aggregate  par  value  of  the  securities  mentioned  above  is  about 
$80,000,000  and  the  advance  in  market  value  is  about  $9,000,000,  equal  to 
about  11^  per  cent.  Debentures  and  preference  stocks  of  the  six  com- 
panies, as  per  table,  have  declined  to  such  an  extent  that  the  actual  value 
of  all  securities  of  said  six  companies  is  less  than  in  1914,  despite  larger 
average  profits  and  higher  ordinary  dividends. 

Despite  the  alarming  losses  met  with  by  the  various  steamship  companies, 
the  large  number  of  ships  requisitioned  by  the  government  and  the  excess 
profits  war  taxes,  the  profits  of  the  business  have  been  enormous.    Advances 


EFFECT  ON  LIFE  INSURANCE  93 

in  common  stocks  of  these  shipping  companies  have  been  quite  large,  although 
not  comparable  with  the  advances  recorded  in  American  steamship  shares. 
All  of  the  investment  securities  of  these  companies,  debentures  and  prefer- 
ence shares,  have,  however,  declined  in  common  with  securities  of  like  char- 
acter of  other  branches  of  industry. 

There  follows  a  table  indicating  the  1914  and  present  prices  of  the  ship- 
ping companies'  securities : 

Par  Average  Price,     Average  Present 

Value        Jan.-July,  1914  1916  Price 

£  £        %  £  £         % 

Cunard  Line  (Ord.)  i  i^^     i62>^  4  3^     375 

Furness,  Withy  &  Co. 
(Ord.)  ...  I  iH     137^  214  214     225 

Peninsular    &    Ori- 
ental   (Ord.)    ..  ICO  295        295  310  323        323 

Royal    Mail     Steam 
Packet    100  92  92  116  114        114 

Anchor  Line  5^  per 
cent   Pfd 10  ioy2     105  '9/4  9  90 

Ellerman  Line  Pfd. 

(Ord.)   10  loj^     105  g%  8H      87^ 

Cunard  Line  Pfd.  (5 
per  cent  cum.)    . .        100  102        102  92  86  86 

The  aggregate  par  value  of  all  shipping  shares  listed  on  the  London 
Stock  Exchange  is  approximately  $280,000,000,  of  which  approximately 
$90,000,000  (32  per  cent)  represents  common  or  ordinary  stocks.  This  class 
of  securities  has  probably  advanced  $45,000,000,  or  50  per  cent,  whereas 
preference  and  debenture  stock  and  bonds  have  declined  not  less  than  15 
per  cent  to  20  per  cent,  equal  to  from  $28,500,000  to  $38,000,000, 

It  is  to  be  understood  that  a  life  insurance  organization  seldom 
is  required,  or  chooses,  to  sell  its  securities.  The  investments 
are  not  made  with  the  idea  of  a  later  sale.  It  is,  in  other  words, 
the  investment  value  and  not  the  speculative  value  which  deter- 
mines the  purchase  for  the  life '  insurance  company.  Under 
normal  conditions  the  current  premiums  and  the  interest  accumu- 
lations exceed  the  current  liabilities;  that  is,  payments  to  policy- 
holders and  operating  expenses.  There  is  thus  a  constantly  new 
supply  of  funds  for  investment,  and  to  the  extent  that  this  is 
true  during  the  present  conditions  of  war  with  the  prevailing 
higher  rates  of  interest  on  many  securities,  the  depreciation  in 
the  old  securities  is  counteracted. 

In  the  case  of  those  securities  whose  value  has  been  written 


94  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

down,  there  is,  it  is  true,  a  chance  that  they  will  later  appreciate 
in  value  and  also  that  securities  now  being  purchased  may 
increase  in  value.  There  is,  however,  no  absolute  assurance  that 
there  will  be  an  appreciation.  There  may  be  a  further  deprecia- 
tion in  some  or  many  of  them.  The  depreciation  in  the  security 
values  of  the  investments  of  life  insurance  companies,  both  in 
the  United  States  and  in  Europe,  had  been  occurring  in  the  case 
of  many  of  these  securities  long  before  the  war  opened.  The 
life  insurance  companies  seldom  take  credit  for  increases  in  the 
value  of  their  securities  until  they  are  actually  realized. 

The  result  is  that  they  yield  a  higher  rate  of  interest  upon 
the  low  values  assigned  to  them.  The  process  of  writing  down 
the  capital  value  of  securities  may  be  carried  too  fai*  under  the 
present  conditions.  Another  method  which  permits  of  easier 
adjustments  to  changed  conditions  in  the  security  market  is  to 
create  investment  reserves,  which  can  be  released  to  policy- 
holders when  the  improved  conditions  indicate  that  such  a 
reserve  is  no  longer  necessary. 

Participation  in  Government  Loans 

Another  factor  which  has  ajfifected  the  finances  of  life  insur- 
ance companies  is  their  participation  in  government  financiering. 
Both  in  the  United  States  and  in  Europe  these  companies  have 
been  called  upon  to  aid  the  government  in  its  loans.  In  the  first 
government  loan  in  the  United  States,  seventy-two  life  com- 
panies reported  subscriptions  to  the  amount  of  $54,005,000,  and 
it  is  probable  that  the  total  subscription  was  at  least  $60,000,000. 
In  the  second  loan  the  reported  subscriptions  were  $83,125,000, 
and  it  is  perhaps  safe  to  state  that  the  complete  statistics  will 
show  a  subscription  of  $100,000,000.  In  England,  for  the  first 
four  government  loans,  the  British  Life  Offices  had  invested  in 
government  securities  £75,000,000.  They  had  sold  or  loaned 
to  the  Treasury,  under  the  plan  of  pledging  securities,  over 
£46,000,000.  Even  before  the  plans  of  the  Treasury  for  the 
pledging  of  securities  to  protect  the  exchange  had  been  developed, 


EFFECT    ON    LIFE   INSURANCE  95 

the  life  offices  had  sold  in  the  open  market  large  blocks  of  securi- 
ties, many  of  which  finally  passed  into  the  control  of  the  Treasury 
and  thus  accomplished  the  purpose  of  protecting  the  rate  of 
exchange,  even  though  they  did  not  come  under  the  direct  control 
of  the  Treasury.  One  writer  estimates  this  latter  amount  at 
£20,000,000. 

In  the  British  war  loan  of  practically  £1,000,000,000,  issued  in  April  of 
1917,  incomplete  statistics  show  that  the  British  insurance  companies  sub- 
scribed £116,814,250,  almost  12  per  cent  of  the  total  loan,  and  the  larger 
part  of  this  subscription  was  made  by  the  life  offices.* 

The  Prudential  Assurance  Company,  the  largest  of  all  life 
insurance  companies  in  Great  Britain,  subscribed  the  enormous 
sum  of  £25,000,000  to  the  so-called  Victory  War  Loan.  This 
company  has  also  developed  a  plan  which  may  increasingly  be 
used  by  other  life  insurance  companies,  under  which  there  is  a 
combination  of  life  insurance  and  war  bond  subscription.  The 
plan  is  briefly  described  as  follows :  ^ 

The  activities  of  the  Prudential  Assurance  Company  in  connection  with 
the  financial  and  other  phases  of  the  war  are  legion,  and  the  latest  scheme 
bids  fair  to  be  an  important  contributory  factor  towards  the  success  of  the 
new  war  loan.  The  National  War  Bonds  which  were  offered  can  not  be  paid 
for  by  instalments,  and  the  smallest  denomination  is  £50.  Although  there 
will  be  a  Post  Office  issue  in  amounts  of  £5  and  upwards,  there  is  there- 
fore an  opening  for  an  appeal  to  the  individual  who  may  expect  to  have 
moderate  amounts  available  at  regular  intervals  for  investments  and,  fur- 
ther, may  prefer  to  postpone  to  a  later  date  his  choice  between  the  five,  seven 
and  ten-year  bonds.  The  modus  operandi  is  quite  simple.  Rates  of  pre- 
mium are  quoted  for  endowment  assurances  payable  in  five,  seven  or  ten 
years;  and  the  company,  which  already  holds  over  £25,000,000  of  "Victory" 
War  Loan,  undertakes  to  make  purchases  of  the  new  bonds  to  the  full 
amount  of  the  assurance  effected.  The  premiums  paid  are,  indeed,  an  indi- 
rect subscription  to  the  new  loan,  while  they  purchase  in  addition  life  assur- 
ance protection  during  the  currency  of  the  policies. 

As  an  illustration,  take  the  case  of  a  man  aged  forty-three  next  birthday 
who  obtains  a  seven-year  "National  War  Bond  Policy"  for  a  £200  bond, 
for  which  he  pays  an  annual  premium  of  £27ios.  8d.  On  October  i.  192^, 
he  may  at  his  option  take  the  cash  value  of  the  seven-year  bond  which  will 

'  Journal  of  the  Institute  of  Actuaries,  vol.  1,  pt.  iii,  No.  267. 
'Post  Magazine  and  Insurance  Monitor,  October  13,  1917. 


96  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

then  have  matured,  vis.,  £206,  or  he  may  receive  a  ten-year  bond  for  £200, 
on  which  he  will  receive  £10  interest  each  year  until  October  i,  1927,  and 
£210  on  that  date.  If  he  dies  during  the  currency  of  the  policy,  his  repre- 
sentatives will  have  the  option  of  taking  a  seven-year  or  a  ten-year  bond 
for  £200  together  with  current  interest.  This  does  not  exhaust  the  attrac- 
tions of  the  policy,  for  if  during  its  currency  the  death  of  the  assured  is 
caused  by  aircraft  or  shells  or  missiles  discharged  thereat  and  takes  place 
within  one  week  of  the  injury,  the  death  benefit  will  be  doubled,  two  bonds 
being  handed  over  for  every  one  otherwise  receivable.  Further  the  income 
tax  authorities  allow  a  rebate  in  respect  of  premiums  paid  on  the  policies. 

No  medical  examination  is  required,  but  only  healthy  lives  are  accepted 
at  the  tabular  rates.  In  the  event  of  the  death  of  the  assured  whilst  engaged 
in  naval  or  military  service  afloat  or  outside  the  United  Kingdom,  or  in 
aerial  pursuits,  all  premiums  paid  will  be  returned  with  compound  interest 
at  5  per  cent,  instead  of  the  benefits  otherwise  assured. 

Taking  the  income  tax  rebate  into  account,  it  is  calculated  that  the  com- 
pound interest  obtained  on  the  premiums  invested  is  equivale^it  to  that 
obtained  from  a  stock  exchange  security  on  which  the  yield,  subject  to  income 
tax,  is  £4  per  hundred  per  annum  for  the  five-year  policy,  £4  i6s.  8d.  per 
hundred  per  annum  for  the  seven-year  policy  and  £si3s.  4d.  per  hundred 
per  annum  for  the  ten-year  policy. 

Proposals  will  be  accepted  for  bonds  of  £50  and  any  multiple  thereof. 
It  will,  of  course,  be  understood  that  where  the  purchaser  exercises  his 
option  of  securing  a  bond  for  a  longer  period  than  that  originally  selected 
it  does  not  involve  the  payment  of  further  premiums. 

In  addition  to  the  subscriptions  of  the  ordinary  life  offices 
in  England,  the  Friendly  Societies  have  subscribed  to  these  loans 
an  amount  estimated  to  be  beyond  £2,000,000.  In  addition  there 
has  been  a  subscription  by  life  offices  to  the  government  loans 
in  the  Allied  nations.  In  the  Canadian  loan  of  1917,  the  life 
companies  of  Canada  subscribed  at  least  $28,120,000,  and  in 
Australia  to  the  loan  of  April,  1917,  the  sum  of  £2,513,500  was 
subscribed  by  Australian  life  offices. 

In  Germany  the  life  insurance  companies  have  likewise  been 
of  inestimable  service  to  the  government  in  financing  the  war. 
The  Imperial  Insurance  Department  states  that  the  life  insurance 
companies  subscribed  to  the  first  four  government  loans  more 
than  850,800,000  marks.^  It  is  also  estimated  that  policyholders, 
through  the  efforts  of  the  life  insurance  offices,  subscribed  more 
than  633,418,000  marks  to  these  loans.    At  the  outbreak  of  the 

*  The  Economic  World,  n.  s.,  vol.  xiv,  No.  9,  p.  313. 


EFFECT   ON    LIFE   INSURANCE  97 

war,  the  investment  in  the  German  loan  was  considered  good, 
since  it  bore  an  interest  rate  in  excess  of  5  per  cent  and  many  in 
Germany  believed  that  the  war  would  be  of  short  duration.  It 
is  reported  that  with  the  duration  of  the  war  and  its  promise  of 
a  long  continuation,  some  of  the  German  life  companies  have 
attempted  to  unload  their  war  securities.  Some  of  the  German 
companies  have  invested  in  the  securities  of  neutral  nations,  the 
Gotha  Life,  reporting  that  it  had  attempted  to  purchase  a  large 
amount  of  Swiss  and  Danish  loans,  but  had  been  awarded  only 
one-tenth  of  the  amount  for  which  it  had  applied. 

The  leading  companies  in  Germany  organized  at  the  outbreak 
of  the  war  a  stock  banking  corporation,  known  as  the  Bank  of 
German  Life  Insurance  Companies.  It  was  stated  that  the 
purpose  of  this  organization  was  to  protect  the  companies  which 
might  threaten  to  become  bankrupt  on  account  of  the  high  war 
losses.  But  up  to  September,  19 17,  only  one  German  life  com- 
pany has  been  in  such  serious  financial  difficulty  as  to  require 
aid  from  this  organization.  Aid  of  various  kinds  has,  however, 
been  rendered  to  the  life  insurance  companies  by  this  central 
organization.  The  capital  stock  of  this  insurance  bank  has  been 
invested  in  war  loans. 

The  situation  in  the  other  countries  at  war  has  not  been  dif- 
ferent with  respect  to  the  great  aid  which  has  been  given  to  the 
government  in  its  war  financiering.  From  a  strictly  financial 
viewpoint,  the  important  point  in  this  practice  of  the  life  insur- 
ance companies  in  aiding  the  government  is  one  of  interest  return 
on  these  loans.  It  will  be  observed  that  in  England  the  life 
offices  have  participated  in  government  loans  to  a  much  greater 
extent  than  the  companies  in  the  United  States.  The  British 
loans  have  borne  a  higher  interest  rate  than  those  yet  issued  in 
the  United  States,  and  the  margin,  therefore,  between  the  interest 
actually  earned  on  the  old  investments  and  these  new  government 
loans  is  less.  In  the  United  States  the  average  earnings  of  the 
life  insurance  companies  have  been  as  follows : 

The  average  rate  of  interest  earned  in  1916  upon  the  total 
investments  of  twenty-nine  of  the  largest  life  insurance  com- 


98  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

panics  in  the  United  States  was  4,91  per  cent,  while  the  average 
yield  obtained  for  the  past  twenty  years  is  4.78  per  cent.  The 
lowest  average  yield  recorded  for  these  companies  during  the 
past  twenty  years  was  4.58  per  cent,  the  figure  for  1902. 

The  interest  rate  borne  by  the  Liberty  Loan  bonds,  therefore, 
was  a  most  serious  impediment  to  the  really  effective  participa- 
tion of  the  insurance  companies  in  the  flotation  of  that  loan. 
The  life  insurance  companies  alone  through  their  own  invest- 
ments in  the  bonds  and  through  the  investments  which  they 
themselves  procured  from  their  policyholders  and  other  persons, 
and  which  their  agents  acting  in  an  associated  capacity  procured, 
certainly  took  care  of  over  $100,000,000  of  the  issue. 

The  United  States  government  war  loans  bear  an  interest  rate 
of  4  per  cent,  and  it  will  be  observed  that  that  is  less  than 
the  life  companies  on  the  whole  have  been  able  to  realize.  It 
should  be  pointed  out  that  the  preceding  rates  are  average  earn- 
ings, and  therefore  the  return  on  the  government  war  loans  is 
considerably  less  than  that  which  some  of  the  companies  have 
been  able  to  earn.  The  interest  element  in  life  insurance  finance 
is  a  very  important  one,  since  the  amount  of  invested  funds  is 
a  very  large  aggregate  and  even  a  difference  of  one-half  of  one 
per  cent  in  the  net  earnings  on  this  large  fund  may  have  a  very 
great  consequence  to  the  policyholders. 

Another  factor  which  has  an  influence  on  the  finances  of  life 
insurance  companies  and  is  especially  important  in  connection 
with  the  subject  of  subscriptions  to  government  loans  and  the 
net  interest  realized,  is  the  manner  in  which  life  insurance  is 
taxed. 

Taxation  of  Life  Insurance  as  Affected  by  the  War 

The  life  insurance  officials  in  all  countries  have  long  objected 
to  the  taxation  of  life  insurance  in  many  of  its  forms,  even  under 
the  normal  conditions  of  peace.  It  is  maintained  that  a  tax  on 
insurance  is  a  tax  on  thrift,  and  even  though  granting  that  all 
taxation  is  of  this  essential  character,  it  is  said  that  the  thrift 


EFFECT    ON    LIFE   INSURANCE  99 

displayed  in  connection  with  life  insurance  is  of  a  peculiar  char- 
acter, which  takes  it  out  of  the  category  of  proper  subjects  of 
taxation,  inasmuch  as  the  insurance  policy  is  a  protection  to 
dependents  and  serves  the  state,  in  that  it  makes  possible  the 
proper  preparation  of  young  for  service  and  at  the  same  time 
relieves  the  state  from  caring  for  dependents.  Whatever  may 
be  the  merits  of  the  controversy,  life  insurance  has  been  sub- 
jected, along  with  the  other  ordinary  objects  of  taxation,  to 
the  higher  rates  of  levy.  This  can  be  considered  as  a  reduction 
in  the  net  return  on  the  investments  which,  as  has  already  been 
shown,  have  heavily  depreciated  in  value  in  many  cases.  It  is 
of  course  to  be  understood  that  the  investments  in  government 
securities  are  in  most  cases  exempt  from  taxation  as  such,  and 
hence  to  this  extent  such  investments  by  the  insurance  com- 
panies have  their  face  value  increased  in  comparison  with  the 
investments  in  the  securities  of  private  corporations. 

In  the  United  States,  the  war  revenue  acts  provide  for  many 
additional  taxes. 

The  taxes  levied  upon  insurance  by  the  new  law  may  be 
divided  for  the  sake  of  convenience  into  two  classes,  (i)  those 
common  to  all  insurance  institutions,  whatever  the  kind  of  insur- 
ance written  by  them,  and  (2)  those  that  apply  specially  and 
severally  to  the  different  kinds  of  insurance.  The  taxes  common 
to  all  insurance  companies  may  first  be  discussed. 

To  begin  with,  as  stated  above,  all  insurance  companies  or 
associations  (except  fraternal  beneficiary  and  mutual  benefit  as- 
sociations, which  remain  exempted  under  the  provisions  of  the 
law  of  September  8,  1916)  must  pay  an  aggregate  tax  upon 
their  income  for  the  calendar  or  for  their  own  fiscal  year,  as 
the  case  may  be,  of  6  per  cent — 2  per  cent  under  the  law  of 
September  8,  19 16,  and  4  per  cent  additional  under  the  present 
law. 

Second,  like  all  other  corporations,  besides  copartnerships  and 
individuals,  insurance  companies  or  associations  are  subject  to 
the  steeply  graduated  war  excess  profits  tax,  which  begins  to 
apply  after  an  extremely  modest  percentage  of  income  to  capital 


lOO  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

has  been  reached,  and  which  amounts  to  20  per  cent  of  the  incre- 
ment of  profits  between  this  low  exemption  and  an  amount 
equivalent  to  15  per  cent  on  the  invested  capital;  25  per  cent  of 
the  increment  between  15  per  cent  and  25  per  cent  of  the 
invested  capital;  and  so  on,  up  to  60  per  cent  of  all  profits  in 
excess  of  33  per  cent  of  the  invested  capital.  This  tax,  however, 
does  not  apply  to  the  business  of  life,  health  and  accident  insur- 
ance combined  in  one  policy  and  issued  on  the  weekly  premium 
payment  plan.  It  may  be  said  in  passing  that  no  one  can  tell  in 
advance  of  the  rulings  of  the  Treasury  Department  what  the 
"  invested  capital "  of  the  different  kinds  of  insurance  com- 
panies— stock,  mutual  and  partly  stock,  but  predominantly 
mutual — will  be  taken  to  be  for  the  purposes  of  the  war'-excess 
profits  tax;  while  still  greater  obscurity  obtains  as  regards  the 
definition  of  that  income  of  insurance  companies  that  is  to  be 
treated  as  profits  or  "  excess  profits." 

Third,  insurance  companies  appear  to  be  subject  to  the  peculiar 
provision  of  the  War  Revenue  Act  which  levies  an  additional  tax 
of  10  per  cent  upon  income  received  during  the  tax  year  but 
remaining  undistributed  for  a  period  of  six  months  after  the 
end  of  the  calendar  or  the  fiscal  year,  as  the  case  may  be — 
though  this  tax  is  not  to  apply  to  that  portion  of  the  undis- 
tributed income  which  is  actually  invested  and  employed  in  the 
business,  is  retained  for  employment  in  the  reasonable  require- 
ments of  the  business,  or  is  invested  in  obligations  of  the  United 
States  issued  after  September  i,  1917. 

Fourth,  in  the  case  of  the  organization  or  reorganization  of 
insurance  companies  on  the  stock  plan,  a  tax  is  payable  of  5 
cents  on  each  $100  of  face  value,  or  fraction  thereof,  of  the 
certificates  of  stock  that  may  be  issued.  The  cost  of  the  transfer 
stamp  tax  on  certificates  of  stock  already  issued  is,  of  course, 
borne  by  the  individual  seller  of  the  stock  and  not  by  the  company. 

Finally,  mention  should  be  made  of  the  important  addition 
to  the  operating  expenses  of  insurance  companies  through  the 
increase  of  the  postage  rates  provided  by  the  War  Revenue  Act. 
Although  this  is  not  in  terms  a  tax  imposed  upon  the  com- 


EFFECT    ON    LIFE   INSURANCE  10 1 

panics,  it  is  to  all  practical  intents  and  purposes  a  tax,  and  one 
whose  aggregate  amount  will  run  to  very  considerable  figures. 

Turning  now  to  the  special  taxes  for  the  different  branches 
of  insurance,  we  may  schedule  these  taxes  as  follows : 

Life  Insurance. — A  tax  equivalent  to  8  cents  on  each  $ioo, 
or  fractional  part  thereof,  of  the  amount  for  which  any  life  is 
insured  under  any  policy  of  insurance — provided  that  on  all  life 
policies  by  which  a  life  is  insured  not  in  excess  of  $500,  issued 
on  the  industrial  or  weekly  payment  plan,  the  tax  shall  be  40 
per  cent  of  the  first  weekly  premium.  The  taxes  just  described 
do  not  apply  to  reinsurances. 

Fire  and  Marine  Insurance. — A  tax  of  one  cent  on  each  dollar 
or  fractional  part  thereof  of  the  premium  charged  under  each 
policy  of  insurance.  Policies  of  reinsurance  are  exempted  from 
this  tax. 

Accident,  Health,  Liability,  Workmen's  Compensation  and 
Miscellaneous  Insurances. — One  cent  on  each  dollar  or  frac- 
tional part  thereof  of  the  premium  charged  under  each  policy. 
Not  applicable  to  reinsurances. 

Surety  Bonds. — On  bonds  of  personal  indemnification  or 
written  on  executory  contracts,  a  flat  tax  of  50  cents;  but  where 
a  premium  is  charged  for  the  bond,  then  one  cent  on  each  dollar 
or  fractional  part  thereof  of  the  premium  so  charged.  Not 
applicable  to  reinsurances. 

At  first  sight,  the  policy  taxes  created  by  the  war  revenue 
bill  do  not  appear  so  very  onerous.  On  life  insurance  policies, 
the  tax  is  8  cents  on  each  $100  or  fractional  part  thereof  of  the 
face  of  the  policy — a  little  more  than  .08  per  cent,  when  account 
is  taken  of  policy  additions,  which  are  generally  less  than  $100 
in  amount,  but  upon  which  the  full  8  cents  must  be  paid.  This 
increment,  however,  is  relatively  small,  and  it  is  correct  within 
a  small  margin  of  error  to  say  that  the  tax  will  yield  .08  per 
cent  upon  the  aggregate  amount  of  new  life  insurance  written 
annually  by  the  regular  life  insurance  companies — fraternal  bene- 
ficiary associations  and  similar  insurance  organizations  having 
been  exempted  by  the  terms  of  the  bill.     In  19 16,  according  to 


102  EFFECTS    OF    THE    WAR   UPON    INSURANCE 

the  compilation  of  The  Spectator,  of  New  York,  the  aggregate 
amount  of  new  life  insurance — regular  and  industrial — written 
by  United  States  companies  was  $4,258,559,220,  upon  which 
a  tax  at  the  rate  of  .08  per  cent  would  yield  $3,406,847. 

It  is  presumably  expected  that  the  insurance  companies  will 
pass  on  to  the  insured  the  taxes  on  the  policies  of  the  latter, 
but  it  is  a  well  known  fact  of  experience  that  imposts  of  this 
kind  are  extremely  difficult  to  collect  from  customers  under 
the  conditions  of  competitive  business,  except  they  take  the  form 
of  stamp  taxes,  which,  curiously  enough,  the  majority  of  people 
do  not  greatly  demur  at  paying,  perhaps  because  of  the  visible 
evidence  that  the  charge  is  really  a  tax. 

Nor  is  this  all,  for  insurance  companies  will  be  subjected  to 
greatly  enhanced  expenses  by  tax  provisions,  other  than  those 
mentioned  as  specifically  applicable  to  them  or  their  business, 
which  will  none  the  less  directly  or  indirectly  affect  them.  Thus 
the  increase  of  letter  postage  from  2  cents  to  3  cents  per  ounce 
and  the  postal  card  rate  from  i  to  2  cents  will  add  very  materially 
to  the  aggregate  cost  of  carrying  on  the  insurance  business.  The 
same  is  true  of  the  taxes  on  telegraph  and  telephone  messages; 
and  more  than  one  of  the  documentary  stamp  taxes  will  be 
found  to  come  into  play.  The  tax  of  5  per  cent  on  the  cost  of 
advertising  or  advertising  space  other  than  in  newspapers  and 
periodicals  will  also  cut  some  figure  in  the  annual  expense  of 
the  insurance  business. 

In  the  revenue  legislation  of  England  life  insurance  has  been 
subjected  to  increased  taxation,  which  has  been  changed  from 
time  to  time.  Interest  earning  has  been  one  of  the  common 
bases  for  taxation,  although  the  companies  have  maintained  that 
they  should  be  taxed  only  on  their  actuarial  surplus.  The  gov- 
ernment agreed  to  this  contention,  only  to  the  extent  of  per- 
mitting a  deduction  for  expenses.  Expenses  differ  greatly  in 
different  companies  and  there  is  always  some  difficulty  in  de- 
ciding what  is  to  be  allowed  as  expenses.  It  was  stipulated  under 
the  above  agreements  that  life  offices  which  transacted  other 
kinds  of  insurance  should  separate  their  expenses,  since  previ- 


EFFECT   ON    LIFE   INSURANCE  IO3 

ously  they  had  been  assessed  on  the  profits  of  the  business  as 
a  whole,  inasmuch  as  the  profits  as  a  whole  were  greater  than 
the  net  earnings.  Under  the  act,  fire  departments  of  composite 
companies  were  to  be  taxed  on  their  fire  profits,  because  they 
are  greater  than  the  net  interest  earnings,  and  life  departments 
were  to  be  taxed  on  the  interest  earnings. 

A  change  was  also  made  by  the  act  of  191 5  with  respect  to 
limiting  the  amount  of  the  premium  on  which  abatement  of  the 
income  tax  was  permitted.  This  allowance  was  fixed  at  7  per 
cent  of  the  actual  capital  sum  assured,  whereas  before,  the  only 
restriction  was  that  the  premium  for  which  abatement  was 
claimed  should  not  exceed  one-sixth  of  the  total  income.  The 
purpose  of  the  change  was  to  prevent  the  plan  of  paying  large 
premiums  for  short  term  endowments,  which  had  been  developed 
as  a  plan  of  insurance  under  which  the  policyholder  could  escape 
the  increasing  income  tax  rates.  There  was  also  in  the  act  a 
limit  of  £100  placed  on  the  amount  which  might  be  paid  "to 
secure  other  benefits  "  for  which  an  exemption  in  the  income 
tax  law  might  be  claimed.  This  referred  chiefly  to  the  pur- 
chasing of  annuities. 

On  any  policy  that  contains  a  provision  for  life  insurance, 
there  is  an  exemption  from  the  income  tax  up  to  3s.  in  the 
pound,  but  not  beyond,  and  in  no  circumstances  is  there  an 
exemption  from  the  super-tax  if  the  income  exceeds  £3CXX).  The 
preceding  discussion  will  indicate  sufficiently  how  the  life  insur- 
ance companies  are  affected  by  this  increased  taxation  and  its 
relation  to  the  rate  of  interest  on  their  investments. 

If,  therefore,  a  summary  of  the  more  important  effects  of  the 
war  on  the  finances  of  life  insurance  companies  is  made,  the 
following  positive  and  negative  influences  are  found  to  prevail : 

As  positive  or  favorable  influences : 

(a)  The  increase  in  premiums,  received  by  those  whose 
policy  contained  or  had  inserted  in  it  a  war  clause. 
Whether  this  is  ultimately,  as  contrasted  with  the 
immediate  effects,  a  positive  factor,  will  depend  upon 
the  actual  mortality  experience  of  war  risks  as  com- 
pared to  the  expected. 


I04  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

(b)  The  writing  down  of  the  security  values  which  has  been 

in  progress  in  some  companies  and  the  resulting  in- 
crease in  interest  return,  as  well  as  the  possibility  of 
a  future  increase  in  the  actual  value  of  these  depreci- 
ated securities. 

(c)  The  investment  of  current  surplus  receipts  in  the  higher 

interest-bearing  securities  which  have  been  placed  on 
the  market  since  the  outbreak  of  the  war. 
As  negative  or  unfavorable  influences : 

(a)  The  decrease  in  the  amount  of  new  business  written 

in  most  countries  and  hence  the  reduction  in  the 
premium  receipt  over  that  which  could  have  been 
secured. 

(b)  The   increased  mortality  on   risks   both  civilian  and 

military  with  or  without  the  extra  premium. 

(c)  The  increase  in  lapses  and  surrenders  of  policies. 

(d)  The  heavy  depreciation  in  securities. 

(e)  The  subscription  to  government  loans  at  a  rate  of  inter- 

est below  that  which  has  been  earned. 

(f)  The  increase  in  the  taxation  of  life  insurance. 

It  will  be  observed  that  the  above  listing  of  effects  seems  to 
indicate  a  generally  unfavorable  effect  of  the  war  on  the  finances 
of  life  insurance.  Such  deduction  seems  to  be  clearly  warranted 
from  the  evidence  at  hand.  There  has  been  so  much  uncertainty 
connected  with  the  establishment  of  rates  for  war  hazards,  and 
so  little  opportunity  of  choice  on  the  part  of  the  officials  with 
respect  to  investments  and  taxation,  that  the  business  of  life 
insurance  may  well  consider  itself  extremely  fortunate,  if  it 
comes  out  of  this  war  as  sound  and  secure  as  it  entered.  It  must 
ever  be  kept  in  mind  when  thinking  of  life  insurance  that  it  is 
a  business  of  the  future  and  whatever  unfavorable  factor  plays 
upon  it  at  any  time  will  project  its  results  into  the  far  distant 
future.  Other  businesses  can  recover  from  negative  influences, 
but  in  life  insurance,  mistakes  in  the  operation  of  the  business 
persist  long  after  the  occurrence  of  the  event. 


EFFECT   ON    LIFE   INSURANCE  IO5 

We  have  discussed  the  effects  of  the  war  on  the  volume  of 
business,  the  effects  on  the  policy  contract,  and  the  effects  on 
the  finances.  There  remains  under  the  general  classifications  the 
effect  of  the  war  on  the  mortality  experience  of  insurance 
companies. 

Effects  on  Mortality  Experience 

It  will  be  understood  that  the  actual  results  under  this  heading 
are  in  their  true  nature  financial  in  character  from  the  standpoint 
of  the  business. 

It  is  hardly  necessary  to  warn  the  reader  again  that  this  is 
a  preliminary  study  of  the  effects  of  the  war  on  insurance,  and 
in  no  other  particulars  can  statements  be  made  as  to  the  effects 
with  more  limitations.  Not  only  are  the  data  of  losses  in  the 
war  extremely  difficult  to  secure,  but  even  if  the  companies  had 
tabulated  and  made  available  their  war  losses  to  date,  there  would 
remain  what  might  be  denominated  a  "  suspended  mortality  " ; 
that  is  to  state,  a  large  number  of  deaths  will  occur  as  a  result 
of  the  war,  either  after  the  soldier  has  been  sent  home  on  account 
of  injuries,  or  after  the  armies  have  been  disbanded  at  the  close 
of  the  war.  Then,  too,  the  mortality  experience  has  probably  not 
reached  its  maximum  rate  for  the  insurance  companies. 

The  war  may  place  a  considerable  strain  on  the  national 
vitality  of  the  people  engaged  in  the  war,  for,  notwithstanding 
the  popular  belief  that  the  length  of  life  is  increasing,  the  most 
reliable  vital  statistics  seem  to  show  that  this  increase  comes 
chiefly  from  a  reduction  in  infantile  mortality.  Important  as 
this  end  is  to  achieve,  it  is  of  even  greater  significance  for  a 
nation  to  have  an  adult  population  which  enjoys  long  years  of 
efficiency. 

A  recent  authority  presents  the  subject  in  its  relation  to  the 
war  as  follows :  ^ 

*  The  Problem  of  National  Vitality  Raised  by  the  Army  and  Navy  Phys- 
ical Examinations,  by  Elmer  E.  Rittenhouse.  The  Economic  World,  n.  s., 
vol.  xiv,  No.  17,  p.  597. 


106  EFFECTS    OF   THE   WAR   UPON   INSURANCE 

The  report  of  the  Surgeon  General  of  the  Navy  for  1916  shows  that  out 
of  105,392  applicants  under  thirty,  70  per  cent  were  rejected.  About  66 
per  cent  of  1,300,000  volunteers  for  the  army  and  navy  since  the  war  was 
declared,  were  rejected.  The  following  table  shows  the  decrease  and  increase 
in  the  death  rate  of  native  whites  of  native  parents  in  the  nine  registration 
states  in  the  United  States: 

Per  Cent  of  Increase  and  Decrease  in  Death  Rate,  1900-1910 

England  and 

Nine  Registration  States  Wales 

Decrease  Increase  Decrease 

Age  Periods                                              Per  Cent  Per  Cent  Per  Cent 

Under  5 15  ..  35 

5-9 18  ..  29 

10-14 12  ..  21 

15-19 19  ..  23 

20-24 16  ..  26 

25-34 14  ••  29 

3^-44 7  ..  ••         31 

45-54 2  ..  27 

55-64 ••  9  22 

65-74 ••  9  17 

75  and  over ..  7  17 

We  may  make  due  allowance  for  the  young  men  who  will  be  physically 
improved  by  their  army  experience  and  still  realize  that  the  general  effect 
of  the  war  upon  the  vital  strehgth  of  the  present  generation  and  of  pos- 
terity will  be  far  from  favorable.  The  war,  if  it  continues,  will  greatly 
increase  our  vast  army  of  physically  impaired  men.  The  additions  will 
consist  of  a  group  of  maimed,  crippled  and  nerve-shattered  men  and  another 
still  larger  group  who  will  have  their  "  constitutions  "  and  resisting  power 
to  fatigue  and  disease  permanently  weakened  by  the  terrible  stress  of  the 
battle  front.  And  to  these  must  be  added  a  very  considerable  number  of 
people  at  home  who  will  suffer  from  the  "  speeding  up "  process  and  the 
excesses  due  to  the  high  pressure  of  the  times.  American  life  strain — the 
tendency  to  overtax  the  body  and  its  machinery,  especially  the  nervous  sys- 
tem— has  never  been  greater  than  at  the  present  time. 

Mortality  of  Nonhellig events 

It  is  not  only  the  effect  of  the  war  on  the  mortality  of  those 
actually  in  the  service  which  has  to  be  considered,  but  also  the 
general  effect  of  the  war  on  the  civilian  population.  A  great 
war  must  inevitably  have  a  great  effect  on  the  mortality  of  all 
classes  of  the  population. 

Dr.  Hersch  compares  the  deaths  registered  in  1870- 1872  in 
the  countries  most  directly  affected  by  the  Franco-Prussian  War, 


EFFECT   ON    LIFE   INSURANCE  10/ 

with  those  registered  preceding  and  succeeding  the  war.  He 
estimates  that  as  against  a  total  of  about  141,000  deaths  officially 
attributed  to  war,  including  deaths  in  hospitals  from  wounds 
or  illness  contracted  in  service,  there  were  854,000  deaths  of 
civilians,  or  about  six  times  the  deaths,  due  directly  to  war. 
This  was  made  up  of  500,000  in  France,  229,000  in  Prussia, 
55,000  in  Belgium,  47,000  in  Holland,  and  23,000  in  Switzer- 
land. The  records  of  1865-1867  give  similar  results  on  a  smaller 
scale,  as  regards  the  war  of  1866  for  Austria,  Belgium  and 
Holland.  From  the  detailed  statistics,  according  to  age  and  sex, 
the  extra  mortality  appears  to  have  fallen  mainly  on  the  very 
young  and  the  very  old,  and  to  have  been  slightly  heavier  among 
males  than  among  females.  In  Belgium  nearly  one-half  of  the 
excess  deaths  were  of  children  under  five  years  of  age;  in  Holland 
over  one-half;  and  in  Switzerland,  one-third.  The  conclusion 
seems  to  be  warranted  that  the  chief  victims  of  war  are  those 
against  whom  it  is  not  chiefly  directed,  mainly,  the  children  and 
the  aged.  There  doubtless  was  a  heavy  mortality  at  the  time 
under  consideration,  as  well  as  during  the  present  war,  among 
the  refugees  who  fled  from  the  war  zone  and  sometimes  into 
adjacent  countries,  and  of  whom  no  complete  record  of  deaths 
could  be  obtained.  Dr.  Dumas  in  his  paper,  U Assurance  du 
risque  de  guerre,  gives  some  interesting  tables  on  the  effect  of 
war  on  mortality.  The  following  table  shows  the  effects  of  the 
Franco-Prussian  War  for  both  combatants  and  neutrals,  and  for 
both  sexes :  ^ 

*  L' Assurance  du  risque  de  guerre,  vol.  vi,  Bulletin  de  V Association  des 
Actuaires  Suisse s. 

Also,  Vcrsicherung  und  Krieg  in  Deutscher  Verein  fur  Versicherungs 
Wissenschaft,  19 14. 

Also,  La  Mortaliti  chez  les  neutres  en  temps  de  guerre,  Dr.  L.  Hersch, 
Privat-docent  in  the  University  of  Geneva,  Paris,  Girard  &  Briere. 


I08  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

France 


Year 

1869. 
1870. 
1871. 
1872. . 


Number  of  Deaths 
Male             Female 

Total 

Per  100    Number  of 
Inhabitants    Deaths 

442,988 
553,037 
692,233 
409,81 1 

421,332 
493,872 
578,777 
383,253 

864,320 
1,046,909 
1,271,010 

793,064 

2.35 
2.84 
3.51 
2.20 

984,526 

943,515 
826,121 
966,000 

Switzerland 

34,918 
37,625 
41,866 
33,469 

32,231 
35,213 
36,132 
30,273 

Belgium 

67,149 
72,838 
77,998 
63,742 

2.52 

2.73 
2.92 

2.39 

81,766 
83,300 
71,626 
84,313 

55,768 
60,572 
75,070 
62,041 

53,839 
57,787 
70,676 
58,088 

Holland 

109,607 

118,359 
145,746 
120,129 

2.21 

2.36       ^ 
2.81 
2.35 

158,687 
164,572 
158,760 
167,377 

41,751 
47,175 
54,303 
48,550 

40,802 
45,891 
52,675 
46,044 

82,553 

93,066 

106,978 

94,594 

2.29 
2.58 
2.95 
2.59 

123,789 
129,997 
128,305 
131,664 

England  and  Wales 

254,863 
265,586 
265,563 
255,135 

239,96s 
249,743 
249,316 
237,^30 

494,828 
515,329 
514,879 
492,265 

2.23 

2.29 
2.26 
2.13 

773,381 
792,787 
797,428 
825,907 

Germany 
(Including  still-births) 

1,154,303 
1,184,315 
1,272,313 
1,260,922 

2.85 
2.90 
3.10 
3-05 

1,594,187 
1,634,646 
1,473,492 
1,692,227 

1869. 
1870. 
1871. 
1872. 


1869. 
1870. 
I87I. 
1872. 


1869. 
1870. 
1871. 
1872. 


1869. 
1870. 
I87I. 
1872. 


1869 

1870 

I87I 

1872.. 

There  is  no  accurate  record  now  available,  or  perhaps  possible 
of  ever  being  available,  of  the  deaths  due  to  the  war,  but  the 
following  table  of  estimates  by  various  authorities  has  been 
made/ 

*  Congressional  Record,  April  18,  1917. 


EFFECT    ON    LIFE   INSURANCE 


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no  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

There  has  been,  doubtless,  a  disposition  in  some  quarters,  espe- 
cially in  the  early  war  period  in  the  United  States,  to  exaggerate 
the  casualties  in  the  war.  In  the  Official  Bulletin  of  the  Federal 
Government  of  September,  19 17,  the  Committee  on  Public  In- 
formation recognizing  this  tendency  published  the  following 
statement : 

The  Committee  on  Public  Information  has  obtained  from  official  sources 
the  most  nearly  accurate  figures  possible  on  the  percentage  of  fatalities  in 
relation  to  casualties  on  the  western  front.  These  figures,  taken  when  the 
casualties  were  greatest  in  proportion  to  mobilized  strength  and  combined 
with  the  highest  proportion  of  deaths,  show  losses  due  to  deaths  from 
wounds  and  killed  in  action  to  be  approximately  11  in  every  i,oco  of  mobilized 
strength. 

According  to  the  figures  presented  by  the  French  High  Commissioner  in 
his  letter  to  the  Secretary  of  War,  the  high-water  mark  of  casualties  in  the 
French  Army  was  reached  early  in  the  war — at  the  battles  of  Charleroi  and 
the  Marne.  The  casualties  in  that  period  were  5.41  per  cent  of  the  mobilized 
strength,  or  541  men  in  every  10,000  with  the  colors. 

Military  experts  in  this  country  agree  that  the  killed  in  action  and  died  of 
wounds  have  never  at  any  time  in  this  war  exceeded  20  per  cent  of  the 
total  casualties.  This  gives  a  figure  of  108.2  fatalities  from  these  causes  in 
every  10,000  mobilized  strength,  or  practically  11  men  killed  in  action  or 
died  of  wounds  for  every  1,000  men  with  the  colors. 

The  war  death  rate  indicated  by  this  statement  Is  obviously 
that  of  only  a  comparatively  short  period  of  the  war,  and  such 
later  figures  as  are  obtainable  make  it  apparent  that  the  rate 
given  is  far  too  high  for  the  average  period  of  service  of  the 
men  in  the  hostile  armies.  According  to  a  recent  press  report 
whose  figures  are  attributed  to  officials  of  the  Marine  Corps,  "  a 
careful  estimate  shows  that  only  one  man  in  fifteen  is  killed, 
and  one  out  of  five  hundred  loses  a  limb.  Recent  reports  from 
French  and  British  hospitals  show  that  about  95  per  cent  recover 
from  wounds,  while  90  per  cent  are  able  to  return  to  the  firing 
line."  Presumably,  these  figures  relate  to  the  whole  period  of 
the  war  up  to  a  recent  date. 

The  mortality  experience  of  life  insurance  companies  in  the 
United  States  remains  to  be  experienced  in  a  large  sense.  Those 
few  United  States  life  companies  which  do  a  foreign  business 
have  had  some  experience. 


EFFECT   ON    LIFE   INSURANCE 


III 


Up  to  October,  191 5,  the  Mutual  Life  Insurance  Company, 
one  of  the  largest  companies,  and  one  which  has  life  risks  in 
many  foreign  countries,  had  experienced  a  loss  of  about  $400,000 
on  war  claims.  The  following  table,  adopted  from  the  paper  of 
Mr.  Thompson,  the  actuary  of  this  company,  before  the  Amer- 
ican Actuarial  Society  shows  the  distribution  of  these  losses  and 
the  causes : 


Country 
Great   Britain 
South  Africa  . 

Australia    

Canada  


Business  in  Force 

July  I,  1914 

(Approximated) 

$  57,950,000 

12,310,000 

7,810,000 

34,340,000 


War  Losses        Percentage 

Lives        Amounts      Losses 

27  $156,213  .270 

5  22,172  .180 

I  493  .007 

II  36,701  .107 


France   

Belgium    

Italy    

Germany    

Austria-Hungary 
United  States   . . 


$112,410,000 

$  40,450,000 

9,000,000 

9,380,000 

9,720,000 

22,030,000 


44 
40 

4 

I 

10 

14 

5 


$215,579 

$  87,117 

7,496 

1,930 

18,517 

39.267 

30,250 


.192 

.215 
.083 
.021 
.190 
.178 


Total 


Ages  at  Death 

25  and  under 

26-35   

36-45   

Over  45   


$202,990,000  118 

Number  of  Lives 
II 
28 
45 
34 


$400,156  .196 

Amount  of  Claims 

$  31,202 

102,071 

105,586 

161,297 


Total  

Causes  of  Death 

Killed  in  service   

Died  from  wound  received  in 

service   

Illness    and    disease    due    to 

service   

Accidents     to     noncombatants 

(includes  Lusitania  losses). 


118 

Amount  of  Insurance 
$101,212 

36,525 
105,105 
63,828 


Total 


$306,670 


$400,156 

Percentage 
33- 

11.9 

34.3 

20.8 

1 00.0 


Canada 


The  Canadian  life  insurance  companies  have  had  an  experi- 
ence extending  over  a  longer  period,  and  the  following  statement 
indicates  the  situation  with  respect  to  these  companies :  ^ 

^Abstract  of  Statements  of  Insurance  Companies  in  Canada,  1916.  Super- 
intendent of  Insurance  of  the  Dominion  of  Canada. 


112 


EFFECTS    OF   THE   WAR   UPON    INSURANCE 


With  a  view  to  ascertaining  the  extent  to  which  the  life  insurance  com- 
panies in  Canada  have  been  affected  by  the  war,  a  circular  was  sent  to  each 
company  asking  for  the  figures  showing  the  war  claims  incurred  during  each 
of  the  three  years  1914,  1915  and  1916.  The  claims  were  further  classified 
in  each  year  according  as  they  were  incurred  under  policies  held  by 

(A)  Enlisted  soldiers  killed  in  action,  or  dying  from  wounds; 

(B)  Enlisted  soldiers  dying  from  other  causes;  and, 

(C)  Other  persons  engaged  in  war  service  or  civilians  dying  as  a  result 

of  military  operations. 

In  order  that  the  enquiry  might  be  as  comprehensive  as  possible  the  cir- 
cular was  directed  to  the  life  insurance  companies  and  the  large  number  of 
fraternal  societies  operating  under  Provincial  Licenses  as  well  as  to  all  such 
companies  and  societies  licensed  by  this  department. 

Returns  have  now  been  received  from  all  companies  and  societies  with  the 
exception  of  a  few  small  Provincial  fraternal  societies,  the  figures  for  which 
will  not  appreciably  affect  the  totals.  The  tabulation  of  the  figures  received 
gives  the  following  results :  i- 

Canadian  War  Claims  Incurred 

Dominion  Provincial 

In  the  Year  1914'  Licensees  Licensees 

$1,000 
1,000 


A  

B  

C 

$15,973 
1,622 

In  the  Year  1915 

A  

B  

C  

$17,595 

$1,607,342 
190,684 
141,709 

In  the  Year  1916 

A 

B  

C  

$1,939,735 

$4,318,839 

226,987 

15,112 

Grand  totals 

$4,560,938 
6,518,268 

$2,000 

$70,135 

10,500 
4,218 

$84,853 

$242,555 

22,961 


$265,516 
$352,369 


In  addition  to  the  foregoing,  Canadian  companies  incurred  claims  under 
policies  held  by  British  and  foreign  policyholders  as  follows : 

In'1914 $55,827 

In  1915   175,260 

In  1916  293,848 


$524,935 


FFECT   ON   LIFE   INSURANCE  II3 

A  very  interesting  example  of  war  insurance  risks  was  that 
of  the  Metropolitan  Life  Insurance  Company  on  the  soldiers 
from  Toronto,  Canada.  The  plan  and  the  results  under  it  are 
shown  by  the  following  statement :  ^ 

Some  American  life  insurance  companies  wrote  war  policies  on  bodies  of 
Canadian  troops  about  to  depart  for  the  seat  of  war.  One  of  these  com- 
panies was  the  Metropolitan  Life,  which  issued  policies  on  approximately 
7,700  men  from  Toronto.  .   .   . 

Out  of  a  total  of  7,700  men  covered  under  two  contracts,  the  company 
has  paid  to  date  283  claims  for  $187,696,  and  there  are  probably  a  large 
number  of  other  claims  not  yet  reported.  The  company  wrote  only  two  con- 
tracts, and  from  the  approximately  8,000  lives  covered  will  be  able,  when 
war  is  over,  to  make  a  valuable  study. 

The  proposition  to  insure  the  soldiers  sent  abroad  from  among  the  citizens 
of  Toronto  was  conceived  by  the  Toronto  City  Council  who  realized  that  the 
families  and  dependents  of  the  departing  fighters  must  be  cared  for  in  some 
way,  and  they  believed  the  wisest  provision  could  be  made  by  means  of  life 
insurance.  Four  contracts  were  entered  into,  covering  a  total  of  8,550  men, 
representing  the  number  of  Toronto  citizen  soldiers  leaving  for  the  war  prior 
to  May  I.  Most  of  the  policies  were  for  $1000  per  man,  the  total  insurance 
aggregating  $9,050,000. 

The  first  contract  was  with  the  Metropolitan  and  covered  approximately 
4000  men  on  policies  for  $1000  each,  at  an  average  cost  of  $43  per  policy. 
The  second  was  with  the  Aetna  Life  which  covered  iioo  men.  The  State 
Life,  of  Indianapolis,  issued  the  third  contract  covering  250  men,  and  the 
fourth  contract  was  with  the  Metropolitan  covering  3700  men.  Both  the 
Metropolitan  contracts  limited  the  covering  to  residents  of  Toronto. 

The  premium  rates  for  the  insurance  were  arrived  at  by  taking  the  regular 
premium  rates  for  each  soldier  at  his  age,  and  adding  $25  per  policy  as  an 
extra  war  risk  premium.  No  further  insurance  of  this  kind  has  been  written 
by  the  Metropolitan. 

Vice  President  Woodward  announced  Wednesday  (July  21)  that  up  to  that 
date  there  had  come  in  and  been  paid  a  total  of  283  claims  under  its  two 
contracts,  for  a  total  of  $187,696,  but  expressed  the  opinion  that  there  were 
probably  a  number  of  other  claims  which  had  not  yet  been  received,  since  a 
considerable  time  would  naturally  elapse  before  the  news  of  this  kind  would 
reach  the  company's  office. 

England 

The  experience  of  English  life  assurance  companies  up  to  the 
latter  part  of  191 6  is  shown  by  the  following  statement:  ^ 

*  The  Economic  World,  n.  s.,  vol.  x,  191 5,  p.  183. 

*  The  Economist,  London,  vol.  Ixxxiii,  August,  1916. 


114  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

War  Mortality  and  English  Life  Offices 

Though,  as  we  have  pointed  out  in  recent  articles,  it  is  not  yet  possible 
to  measure  the  full  effect  upon  life  insurance  offices  of  war  mortality,  some 
idea  of  what  it  has  cost  the  companies  to  date  can  be  obtained  by  collating 
the  claim  returns  which  have  been  published.  Roughly,  it  may  be  said  that 
so  far  the  offices  have  not  found  war  risks  a  greater  burden  than  they  antici- 
pated, but  the  obligations  assumed  with  or  without  extra  premiums  are  still 
quite  onerous  enough  to  call  for  careful  provision  for  the  future.  A  serious 
responsibility  was  undertaken  when,  at  the  outbreak  of  the  war,  it  was 
decided  to  make  no  extra  charge  to  existing  policyholders  who  should  go 
on  active  service,  but  a  fair  measure  of  what  that  responsibility  means  is 
now  deducible  from  the  experience  of  the  last  two  years.  New  policies  issued 
to  soldiers  and  sailors  have  carried  from  12  to  15  per  cent  additional  pre- 
mium, and  the  companies  have  had  the  benefit  of  much  extra  revenue  in  this 
respect,  but  there  are  signs  that  terms  may  advance,  the  action  of  one 
office  recently  in  asking  a  supplementary  premium  of  nearly  yqp  per  cent 
being  a  plain  indication  that  it  is  not  desirous  of  handling  any  further  busi- 
ness of  this  kind.  Generally  speaking,  the  war  has  directly  increased  mor- 
tality claims  by  about  12  per  cent,  but  in  only  one  or  two  instances  has  this 
advance  caused  the  margin  of  total  expectation  to  be  exceeded,  and  in  quite 
an  appreciable  number  of  cases  even  with  the  handicap  of  war  deaths  the 
aggregate  mortality  claims  last  year  exhibited  a  decline.  This  is  the  more 
remarkable  because  it  has  to  be  remembered  that  the  war  has  also  indirectly 
increased  the  death  rate  through  the  wear  and  tear  it  has  entailed  on  old 
lives,  in  some  classes  of  which  claims  have  been  about  35  per  cent  above 
the  average. 

It  is  roughly  computed  that  throughout  the  British  Empire  over  £8,000,000 
has  been  paid  in  war  claims,  and  the  great  advance  now  progressing  on  the 
Western  front  is  likely  to  add  substantially  to  that  figure.  This  has  been 
mostly  made  up  of  moderate  sums,  very  few  claims  of  exceptional  amount 
having  fallen  in,  according  to  the  particulars  which  have  been  made  public. 
There  has  been  one  claim  for  £100,000,  and  several  for  £50,000,  but  these 
payments  are  quite  abnormal  in  the  experiences  of  offices.  The  industrial 
companies,  as  the  nature  of  their  business  would  lead  one  to  expect,  have 
had  to  meet  a  large  number  of  war  obligations,  but  the  mean  individual 
sum  is  small — about  £18 — and  would  represent  little  more  than  the  equiva- 
lent of  burial  money,  were  the  family  saddled  with  the  funeral  expenses  of 
the  deceased  policyholder.  The  amount  of  the  war  policy  paid  by  the 
ordinary  office  averages  about  £1000.  Thus  the  mean  of  the  Scottish 
Amicable  has  been  £676,  of  the  United  Kingdom  Temperance  £926,  of 
the  Legal  and  General  £1130,  of  the  Phoenix  £1138,  of  the  Clergy  Mutual 
£1018,  and  of  the  Scottish  Life  £650. 

In  the  subjoined  table  is  shown  the  war  claim  experience  of  fifty -two  offices 
for  the  last  two  years: 


EFFECT    ON    LIFE   INSURANCE 


"S 


Abstainers  &  General  

Alliance  

Atlas    

Britannic  

British  Equitable   

Caledonian    

Century    

Clergy  Mutual  

Clerical,  Medical  &  General.. 

Commercial  Union   

Co-operative    

Eagle    

Edinburgh    

English   &   Scottish   Law 

Equitable    

Equity  &  Law    

Friends'    Provident    

General  Life   

Gresham    

Guardian    

Law   Union   &   Rock 

Legal  &  General   

Life  of   Scotland   

London   &  Lancashire 

London  Life   

Marine   &   General 

Metropolitan    

National   Mutual    

National   Provident   

North  British  &  Mercantile. . 

Northern     

Norwich  Union    

Pearl 

Phoenix    

Profits   &   Income    

Prudential    

Refuge     

Royal  Exchange    

Royal  Insurance 

Royal  London  Mutual  

Scottish  Amicable   

Scottish   Equitable    

Scottish  Life  

Scottish  Provident    

Scottish  Temperance    

Scottish  Widows'  Fund   .... 

Standard     

Star    

Sun    

United  Kingdom  Temperance 

University  

Wesleyan  &  General    

'  For  year  ended  Jan.  31,   1915 

*  "   "    "   May  31,  191S 

•  "   "    "   May  31,  19:6 

*  "   "    "   Tune  30,  igi6 
'  "   "    "   Nov.  20,  1915 

•  ' Apr.  5,  191S 


War  Mortality 

Claims 

1914  191S 

£  £ 

800  5,200 

80,500  147,300 

9,600  37,600 

4,500  22,100 

*  5,700  7,700 

3,400  25,800 

1,300  8,700 

*  27,500  '  27,500 
65,400  *  54,100 
30,200  80,000 

400  6,000 

12,900  46,800 

15,300  36,000 

8,000  30,500 

11,000  21,000 

70,000  41,600 

■  1,300  •  14,800 

300  8,500 

19,500  51,200 

14,400  24,200 

28,100  24,000 

102,700  166,300 

*  27,300  '  18,000 

5,900  37,700 

5,600  25,000 

900  16,300 

9,000  43,500 

20,000  16,000 

"  5,000  "  22,800 

79,600  153,600 

5,400  25,200 

54,000  146,500 

14,000  76,100 

39,700  63,800 

nil  nil 

192,400  571,100 

13,200  87,500 

15,100  49,600 

25,000  70,000 

12, 100  68,600 

4,100  35,800 

*  24,000  *  27.300 
10,000  26,800 
42,700  119,400 

nil  17,900 

50,000  150,000 

"  38,400  "  71,800 

21,100  12,500 

22,000  77,800 

14,900  81,500 

"  1,500  "  13,900 

5,100  29,600 

^  For  year  ended  Apr. 
Mar. 
Mar. 
Nov. 
Apr. 
Apr. 


Ratio  to  Total 
Death  Claims 
191S 


1914 

% 

4-5 
7-7 
7.0 

0.9 

6.2 

2.2 
1 1.2 

8.9 
18.7 

91 

0.3 

7.0 

6.2 

4-5 

3-7 
21.0 

0.8 

0.2 

4.6 

5-5 

5.6 
20.1 

7-3 
2.9 

1-9 
1.2 
8.8 
12.3 
1-5 
9-7 
2.1 
8.9 
1.2 
6.3 

*  4.6 
i.o 
6.1 

4-5 
2.2 
1.6 
7.1 
13-5 
5-3 

4.0 
5-1 
6.5 
5-1 
3.5 
2.3 
4.8 

5.  J916. 
I,  I9JS- 
I,   1 916. 

IS.  1915- 

30.    I9>S. 
30,   1916. 


% 
20.1 
1 1.0 
175 

4-1 

8.1 
136 
44.6 

9.6 
18.0 
25-3 

4-4 
20.3 
14.0 
14.7 

5-7 
135 

7.6 

6.0 
12.0 

9.6 

4-3 
28.3 

5.0 
15-9 

8.3 
17-4 
22.0 

6.7 

7-1 
16.2 
11.2 
22.8 

5-9 

9.1 

1 1.4 
5.8 
22.0 
10.8 
10.5 
11-5 
7.1 
34-8 
13-9 
21.2 

1 1.3 
8.7 
3-9 
147 
15.5 
22.4 

6.7 


Ll6  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

The  total  war  claims  paid  by  the  above  offices  are  £4,313,300.  In  1915 
the  figure  was  £3,042,500,  equal  to  11.6  per  cent  of  the  total  mortality  roll. 
In  1914  the  amount  was  £1,270,800,  equal  to  5.5  per  cent  of  the  aggregate 
claims  for  that  year,  but  on  a  five  months  basis — the  duration  of  hostilities — 
equal  to  13.2  per  cent.  Thus  the  proportion  has  appreciably  improved 
during  the  last  twelve  months.  To  put  it  in  another  way,  the  average 
monthly  payments  in  1915  were  £253,500,  as  against  £254,200  for  the  war 
period  of  1914.  The  increase  in  the  total  mortality  claims  was  13.3  per 
cent,  whilst  deducting  war  obligations  the  rise  would  have  been  5.9  per 
cent.  There  has  been  a  considerable  variation  in  the  experience  of  the  dif- 
ferent offices.  Only  two  companies — the  Legal  and  General,  and  the  Pru- 
dential— saw  their  war  claims  run  into  six  figures  in  1914,  but  last  year  five 
other  offices — the  Alliance,  the  North  British  and  Mercantile,  the  Norwich 
Union,  the  Scottish  Provident,  and  the  Scottish  Widows'  Fund — were  over 
that  limit.  The  Profits  and  Income  only  does  a  small  life  business,  but  it 
is  nevertheless  a  noteworthy  coincidence  that  it  should  have  escaped  any 
war  claims  whatever.  The  Scottish  Temperance  also  had  this  geod  fortune 
in  1914.  The  highest  ratio  for  191 5  is  recorded  by  the  Century  with  44.6 
per  cent,  the  Scottish  Life  coming  second  with  34.8  per  cent,  and  the  Legal 
and  General  third  with  28.3  per  cent. 

The  situation  with  respect  to  the  industrial  companies  is  more 
serious,  inasmuch  as  there  has  been  called  into  the  service  of  the 
nation  many  of  the  wage  earners  who  as  a  class  particularly 
carry  industrial  insurance.  The  condition  as  a  whole  is  repre- 
sented by  the  experience  of  the  Prudential  Insurance  Company 
of  England,  the  company  which  has  the  largest  amount  of  insur- 
ance of  this  character. 

The  burden  of  the  war  claims  is  indicated  by  the  experience 
of  the  Prudential,  the  largest  of  the  life  offices.  Its  total  pay- 
ments in  war  claims  amounted  to  no  less  than  £682,909  on  31,729 
lives,  and  of  these  clairns  a  total  of  £512,438  on  30,020  lives 
were  in  the  industrial  department,  and  £170,471  on  1,709  lives  in 
the  ordinary  department. 

A  further  analysis  of  the  payments  shows  that  there  were 
claims  of  £106,433  on  3,999  lives  of  men  serving  in  the  navy 
and  £556,590  on  27,147  lives  of  men  serving  in  the  army.  In 
addition,  £17,875  was  paid  on  account  of  487  lives  lost  in  mer- 
chant ships  and  £2,011  was  paid  on  96  claims  by  bombardment 
and  air  raids. 


EFFECT   ON   LIFE   INSURANCE  II7 

A  number  of  new  plans  have  been  devised  under  which  insur- 
ance is  granted.  The  Equity  and  Law,  London  Life,  Clerical, 
Medical  and  General,  and  the  Royal  joined  the  ranks  of  com- 
panies which  in  recent  years  have  reduced  their  rates  for  non- 
profit, that  is,  nonparticipating  insurance.  Some  of  the  tables 
used  provide  for  very  low  rates.  The  uncertainty  of  the  war  as 
to  mortality  and  investments  and  a  number  of  other  factors 
affecting  life  insurance  have  made  the  non-profit  policy  more 
popular,  since  under  it  a  definite,  fixed  cost  is  guaranteed.  In 
addition,  the  uncertainties  of  the  war,  both  at  home  and  abroad, 
have  brought  home  to  many  the  importance  of  being  insured  as 
early  in  life  as  possible,  and  for  as  large  amounts  as  possible. 
Again,  the  increase  in  taxation  and  the  higher  cost  of  living 
cause  people  to  wish  to  pay  as  little  as  possible  for  their  insur- 
ance. A  reduction  of  annuity  rates  was  made  by  a  number  of 
offices,  due  to  the  rising  rates  of  interest.  This  is  especially 
true  in  respect  to  elderly  lives,  since,  so  far  as  can  be  seen,  interest 
rates  for  a  number  of  years  will  in  all  probability  be  high. 

Germany 

The  situation  in  Germany  and  other  enemy  nations  is  more 
difficult  to  ascertain,  but  there  is  available  some  information 
regarding  the  earlier  experience  of  the  German  companies. 

The  fiftieth  annual  report  of  the  Prussian  Life  Insurance  Company,  one 
of  the  leading  German  life  offices,  has  recently  been  made  public.  It  is  of 
particular  interest  as  covering  seventeen  months  of  actual  warfare  in  Europe. 
At  the  outset  of  the  war  in  1914,  the  Prussian  Life  had  nearly  sixty-six  thou- 
sand policies  outstanding,  the  aggregate  amount  of  which  was  $74,330,000, 
and  although  some  of  the  policies  were  on  the  lives  of  men  who  had  passed 
the  age  limit  for  military  service,  the  vast  majority  of  them  were  within  the 
age,  and,  therefore,  the  company  had  a  very  considerable  exposure  to  the 
hazards  of  war. 

In  seventeen  months  of  war  there  were  lost  out  of  this  body  of  policy- 
holders 527  lives,  with  an  aggregate  amount  of  $304,142  and  thus  it  appears 
that  out  of  each  one  thousand  lives  insured  by  this  company,  eight  were  lost, 
and  out  of  each  $1000  of  insurance  $4.10  matured  by  death.  The  average 
policy  for  all  insurants  was  about  $1200,  but  the  average  loss  per  person 


Il8  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

in  military  service  was  only  $577,  as  the  younger  men  carried  smaller  than 
average  amounts  of  insurance.  In  this  connection  it  is  also  interesting  to 
note  that  the  maximum  amount  which  the  "  Prussian  "  Company  insures  on 
any  one  life  is  $6250  [marks,  25,000] — a  very  conservative  limit  when  judged 
by  the  practices  of  American  companies. 

The  mortality  experience  of  the  company  for  1914  and  1915  was  about 
105  per  cent,  as  follows : 

Tabular  Mortality  Actual  Mortality  Incurred 

Year  Expected  Natural  Causes  from  War 

1914 $   924,000  $803,460  $118,512 

1915 1,084,000  952,615  185,630 

The  company  has  been  able  to  declare  a  dividend  to  its  shareholders  at  its 
long  established  rate  of  16  per  cent  per  annum,  to  apportion  to  its  participat- 
ing policyholders  an  amount  fully  equal  to  preceding  years,  and  to  set  aside 
a  special  reserve  to  meet  war  claims  in  1916,  after  which  the  financial  balance 
sheet  shows  total  assets  of  $23,921,000,  reserves  in  excess  of  $20^000,000,  and 
a  surplus  as  regards  policyholders  of  almost  $2,000,000.^ 

Among  the  disbursements  during  the  war  period  death  claims 
play,  of  course,  the  most  prominent  part.  The  exact  amount  of 
the  total  death  claims  is  unknown  for  the  reason  that  many 
claims  remain  unsettled.  In  1913,  the  year  preceding  the  war, 
the  claims  from  death  alone  amounted  to  150,000,000  rnarks 
($35,700,000).  In  1914,  this  amount  rose  to  219,000,000  marks 
($52,122,000),  and  in  1915  to  240,000,000  marks  ($57,120,000). 
The  war  losses  paid  during  the  last  five  months  of  1914  were 
very  high,  and  for  many  companies  they  were  in  excess  of  the 
total  losses  for  the  full  twelve  months  of  191 5.  During  the  year 
1916  the  war  losses  actually  paid  were  even  lower,  despite  the 
fact  that  a  much  larger  force  was  under  arms.  One  must,  how- 
ever, be  very  careful  not  to  draw  final  conclusions  from  these 
figures.  Many  German  companies  are,  according  to  clauses 
contained  in  their  policies,  not  liable  to  pay  claims  arising  from 
death  due  to  war. 

An  exact  analysis  of  the  financial  losses  due  to  death  from 
war  would  be  of  great  interest,  but  is  exceedingly  difficult. 
According  to  an  expert  article  in  the  German  insurance  organ, 
Massius'   Rundschau,   the   net   reserves   released   through   ma- 

^  The  Economic  World,  n.  s.,  vol.  xii,  1916,  p.  115. 


EFFECT   ON   LIFE   INSURANCE  IIQ 

turity  by  death  amounted  to  48  per  cent  of  the  total  face  value 
of  policies  terminated  by  death.  Assuming  that  the  general 
mortality,  as  apart  from  war  mortality,  would  remain  about  the 
same,  we  might  expect  the  same  percentage  of  reserves  released 
on  account  of  death  from  ordinary  causes.  During  1914-1915 
the  reserves  released  by  all  causes  of  death,  including  death 
directly  due  to  the  war,  amounted  to  only  37  per  cent  of  the 
face  value  of  the  total  death  claims.  The  reserves  on  hand  for 
death  arising  from  the  war  may,  therefore,  be  assumed  to  have 
been  rather  small,  indicating  that  a  large  number  of  those  who 
were  killed  had  taken  out  insurance  after  the  outbreak  of  the 
war. 

Two  years  after  the  outbreak  of  hostilities  German  life  insur- 
ance companies  would  accept  no  war  risk  except  for  an  extra 
annual  premium  of  from  four  to  six  per  cent  of  the  face  of  the 
policy.  The  war  losses  on  policies  written  before  19 14  have 
been  met  in  part  by  the  accumulated  war  emergency  funds. 

The  surplus  earnings  of  the  companies  have,  of  course,  de- 
creased. In  19 1 3,  the  surplus  was  177,000,000  marks  ($42,- 
126,000);  in  1914,  154,000,000  marks  ($36,652,000),  and  in 
191 5,  150,000,000  marks  ($35,700,000).  The  surplus  earnings 
have  been  used  with  great  precautions,  as,  according  to  the  gov- 
ernment report,  there  is  no  way  of  knowing  how  long  the  war 
will  last  and  how  the  additional  losses  may  accumulate.  More- 
over, the  companies  realize  that  they  will  be  confronted  with 
heavy  expenses  in  the  reorganization  of  their  field  and  office 
staffs  when  peace  finally  comes.  They  also  realize  the  prob- 
ability of  an  increased  mortality  among  the  civil  population  and 
heavy  losses  arising  from  a  sudden  drop  in  many  of  their 
securities. 

It  may  be  emphasized,  in  conclusion,  with  reference  to  the 
mortality  experience  of  insurance  companies,  that  it  is  too  soon 
to  be  dogmatic  as  to  what  this  experience  will  be.  There  has 
been  little  compilation  of  the  insurance  losses  in  the  countries 
which  have  been  engaged  in  the  war  for  some  time.  In  such 
nations  as  the  United  States,  there  has  not  yet  been  sufficient  time 


I20  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

to  show  what  the  losses  of  war  will  truly  be.  It  may  be  ventured 
that  for  all  insurance  companies  these  losses  under  the  terms 
under  which  the  policies  were  written  will  be  serious  enough. 

Plans  for  Meeting  Increased  Mortality  Cost 

In  the  preceding  discussion,  the  effect  of  the  war  on  the  cost 
of  life  insurance  to  the  prospective  applicant  has  been  considered. 
In  a  general  sense  this  cost  became  prohibitive  for  large  numbers 
of  those  who  were  called  into  the  service  of  their  respective 
nations,  and  yet  the  need  of  insurance  protection  for  the  de- 
pendents was  never  more  clearly  recognized.  The  soldier  and 
sailor  entering  the  army  or  navy  needed  and  desired  ..the  insur- 
ance, but  they  found  that  the  insurance  companies  either  were 
increasing  the  rates  to  prohibitive  points,  or  were  refusing  to 
grant  insurance  on  any  terms.  Nor  are  the  companies  to  be 
criticized  for  such  procedure.  In  practically  all  countries,  their 
treatment  of  old  policyholders  in  particular  has  been  liberal. 
Indeed,  if  one  were  to  venture  a  prophecy,  it  would  be  that  the 
final  results,  which  will  be  known  only  when  war  statistics  are 
available,  will  be  to  show  that  the  officials  of  insurance  com- 
panies were  in  some  respects  too  liberal.  There  is  no  reason 
to  argue  that  the  insurance  companies  which  are  made  up  essen- 
tially of  policyholders  should  assume,  as  a  part  of  society,  the 
burden  and  cost  of  granting  protection  to  the  dependents  of 
soldiers  and  sailors.  Such  military  service  was  undertaken  for 
the  benefit  of  the  nation  as  a  whole  and  not  peculiarly  for  the 
benefit  of  the  policyholders  in  life  insurance  companies.  The 
life  insurance  company  is  a  private  organization,  established  and 
operated  for  the  benefit  of  its  members.  There  is  no  good 
reason  why  it  should  open  its  membership  to  any  particular  class, 
except  as  they  can  qualify  under  the  terms  of  the  organization. 
No  public  or  philanthropic  duties  can  be  required  of  insurance 
companies.  The  situation,  therefore,  with  respect  to  giving  pro- 
tection to  the  millions  of  dependents  of  those  entering  the  war 
was  an  impossible  one  for  the  life  insurance  companies.     Prac- 


EFFECT    ON    LIFE   INSURANCE  121 

tically  considered,  there  were  only  three  methods  of  meeting  the 
situation,  so  far  as  life  insurance  was  concerned : 

First,  the  companies  might  refuse  to  insure  the  lives  of  those 
entering  the  army  and  navy,  either  by  absolute  refusal  or  by 
placing  the  premium  at  a  prohibitive  point.  In  case  of  the  death 
of  the  soldier  or  sailor,  the  government  might  grant  a  pension 
to  the  dependents.  During  his  period  of  service,  the  dependents 
might  depend  upon  the  uncertain  public  and  private  charity.  The 
twentieth  century  developed  sense  of  social  obligation  would  not 
permit  such  a  disposition  of  the  question. 

Second,  provision  might  be  made  for  the  insuring  of  the  lives 
of  soldiers  and  sailors  in  the  private  insurance  companies  at  such 
rates  as  the  officials  decided  and  the  state,  either  national  or 
local,  would  pay  either  all  the  premium  or  such  part  of  it  as 
was  represented  by  the  extra  hazard  of  the  war.  In  some  cases 
this  has  been  done,  as,  for  example,  in  the  case  of  the  city  of 
Toronto,  Canada,  which  insured  the  lives  of  her  citizens  who 
were  called  into  war  service.  But  as  a  practical  solution  of  the 
question,  this  would  have  been  an  awkward  means  of  accom- 
plishing the  desired  end.  Too  many  millions  were  engaged; 
there  were  many  different  private  companies  among  which  to 
distribute  the  business.  There  were  many  different  local  govern- 
ments, no  two  of  which  might  agree  upon  the  amount  and  the 
terms  of  insurance  and  thus  discrimination  of  an  invidious 
character  would  arise.  The  national  government,  where  one 
existed,  might  have  insured  the  risks  in  the  private  companies, 
but  this  would  not  have  removed  all  the  above  practical  objec- 
tions and  others  which  are  apparent. 

Third,  the  national  government  itself  might  undertake  the 
granting  of  life  insurance.  This  method  is  the  one  which  has 
been  adopted  in  the  United  States,  and  the  chief  merits  and 
defects  of  the  plan  as  a  whole  will  be  discussed  in  connection 
with  the  following  analysis  of  the  method  now  in  operation  in 
the  United  6tates : 


122  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

Government  Insurance  in  the  United  States 

The  law  enacted  by  Congress  established  a  Bureau  of  Military 
and  Naval  Insurance  under  the  Secretary  of  the  Treasury,  and 
provided  for  the  issuance  of  policies  of  life  insurance  to  those  in 
the  military  and  naval  service  of  the  nation,  in  addition  to  the 
allotment  of  soldiers'  and  sailors'  pay  to  dependents,  as  well  as 
provisions  for  reeducation,  and  other  features  to  be  discussed 
in  succeeding  pages  of  this  monograph. 

The  bill  had  its  origin  in  the  conditions  previously  described, 
and  resulted  from  the  cooperation  of  the  Treasury  Department, 
the  Committee  on  Labor  of  the  Advisory  Commission  of  the 
Council  of  National  Defense,  the  Departments  of  Commerce, 
Navy,  Labor,  an  advisory  committee  of  insurance  fepresenta- 
tives,  and  others.  The  insurance  representatives  favored  the  bill 
except  the  provision  for  life  insurance,  arguing  that  the  other 
provisions  of  the  bill  were  sufficiently  liberal,  although  they 
favored  the  payment  of  a  direct  compensation  of  $i,ooo,  in 
case  of  the  death  during  service,  or  within  five  years  after  dis- 
charge from  the  service.  The  views  of  the  representatives  of 
the  government  are  indicated  in  the  following  extract  from  the 
letter  of  Secretary  of  the  Treasury  McAdoo  to  President 
Wilson :  ^ 

The  bill  is  intended  to  meet  those  essential  and  fundamental  principles  of 
justice  which  you  have  so  much  at  heart.  Its  main  purpose  is  to  grant  a 
reasonable  government  indemnity  against  the  losses  and  risks  incurred  in  the 
discharge  of  a  patriotic  duty  and  in  the  performance  of  an  extraordinarily 
hazardous  service  to  which  the  government  has  called  and  forced  the  citizen. 
It  provides  not  only  for  the  man  but  for  his  family. 

It  aims  to  accomplish  these  ends  by  granting  a  reasonable  measure  of 
indemnity  against  the  risk  of  loss — 

(i)  Of  support  of  the  breadwinner; 

(2)  Of  life  and  limb; 

(3)  Of  present  insurability  at  ordinary  rates. 

The  risk  of  dependency,  in  the  case  of  an  enlisted  man's  family,  is  indem- 
nified against  by  allotment  of  part  of  the  pay  of  the  enlisted  man,  supple- 
mented by  a  family  allowance  granted  and  paid  by  the  government. 

^  Relief  of  Officers  and  Enlisted  Men,  Sen.  Doc,  No.  75,  65th  Cong., 
1st  Sess. 


EFFECT  ON  LIFE  INSURANCE  1 23 

The  risk  of  disability  or  death  as  to  officers,  men  and  nurses  while  in 
active  service  as  part  of  the  military  or  naval  forces  of  the  United  States 
is  indemnified  against  by  compensation  on  the  analogy  of  the  workmen's 
compensation  act,  rather  than  through  a  pension  system.  The  sacrifice  of 
and  loss  to  the  farhily  is,  however,  taken  into  consideration  by  varying  the 
amount  of  compensation  both  after  death  and  during  disability  with  the  size 
of  the  family. 

While  in  some  respects  the  compensation  system  gives  less  than  the  present 
pension  system,  in  other  respects,  especially  in  caring  for  the  family  after 
the  man's  death,  it  gives  more,  and  on  the  whole  aims  at  greater  equity. 

If  total  disability  results  from  personal  injury  suffered  or  disease  con- 
tracted in  the  course  of  the  service,  the  compensation  based  on  the  per- 
centage of  pay,  but  with  a  minimum  of  from  $40  to  $75  per  month,  accord- 
ing to  the  size  of  the  family,  may  increase  for  the  higher  officers  to  a  maxi- 
mum of  $200  per  month.  Compensation,  however,  is  not  payable  while  the 
officer  receives  retirement  allowance. 

Partial  disabilities  are  compensated  for  on  the  basis  of  percentages  of  the 
compensation  for  total  disability,  dependent  upon  the  average  impairment  of 
earning  capacity  resulting  from  such  injuries  in  civil  occupations.  Provision 
is  made  for  commutation  under  regulations,  but  of  a  part  only  of  the  com- 
pensation. 

Medical,  surgical  and  hospital  treatment,  supplies  and  appliances  are  given. 

Rehabilitation  and  reeducation  of  the  injured  men  are  vital  to  the 
scheme.  Compensation  is  a  helpful  measure  of  justice,  but  rehabilitation  and 
reeducation,  fitting  him  for  a  life  of  activity  and  usefulness,  either  in  his 
former  or  some  other  vocation,  is  an  obligation  fundamental  both  to  him  and 
his  fellow  men.  ,   .   . 

Death  or  disability  resulting  from  injury  suffered  or  disease  contracted  in 
the  course  of  the  service  is  covered  irrespective  of  the  date  when  disability 
or  death  occurs,  but  if  it  occurs  after  discharge  or  resignation,  it  is  com- 
pensated for  only  if  a  certificate  has  been  obtained  within  one  year  after 
discharge  or  resignation  that  the  person  was  suffering  from  injury  or  disease 
so  incurred  or  contracted  likely  to  result  later  in  death  or  disability.  .    .   . 

Risk  of  noninsurability  at  ordinary  rates  is  indemnified  against  by  the 
issuance  of  government  insurance,  covering  total  disability  and  death,  to 
officers,  men  and  army  nurses  while  in  active  service  as  part  of  the  military 
or  naval  forces,  in  an  amount  of  $1000  to  $10,000. 

The  excess  cost  due  to  the  increased  mortality  and  disability  risk  should 
clearly  be  borne  by  the  government.  The  cost  of  administering  the  insur- 
ance bureau  for  the  benefit  of  the  fighting  men  is  also  a  proper  govern- 
mental charge.  As  the  government  will  not  have  the  other  expenses  incident 
to  insurance,  the  premium  rates  to  be  charged  by  it  are  based  upon  the  mor- 
tality experience  tables  of  peace  times  without  "  loading."  "  Lt)ading  "  com- 
prises overhead  charges,  commissions  to  agents,  advertising,  etc.,  and  is  a 
large  item  in  the  premium  charges  of  private  companies. 

The  cheapest  form  of  insurance,  costing  during  the  war  on  an  average 
$8  per  $1000  of  insurance,  and  thus  bringing  even  the  maximum  of  $10,000 


124  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

insurance  within  the  reach  of  practically  every  private,  is  provided  for. 
After  the  war  the  insurance  may  be  converted  into  other  forms  with  earlier 
maturity,  the  premiums  to  be  based,  however,  on  the  same  mortality  tables 
and  without  "  loading."  All  insurance  is  to  be  payable  in  instalments,  to  be 
nonassignable,  and  free  from  the  claims  of  creditors,  either  of  the  insured 
or  of  the  beneficiary.  It  is  to  be  limited  to  wife,  children  and  other  specified 
kindred.  It  must  be  applied  for  within  120  days  after  the  terms  are  promul- 
gated or  subsequent  enlistment  or  entrance  into  the  service.  For  those  who 
are  totally  disabled  or  die  before  they  have  had  an  opportunity  to  insure 
within  the  prescribed  period  of  120  days,  insurance  in  the  sum  of  $5000  is 
deemed  to  have  been  applied  for  and  granted. 

Through  the  insurance  the  opportunity  is  given  to  every  man  to  gain 
greater  protection  for  himself  and  for  his  family  than  the  government  itself 
voluntarily  gives  in  case  of  total  disability  or  death  resulting  from  injuries 
or  disease  contracted  in  the  service. 

But  it  ought  also  to  check  any  future  attempts  at  service  pension  legisla- 
tion by  enabling  a  man  now  to  provide  against  impairment  through  old  age, 
total  disability,  or  death  resulting  from  other  causes,  and  to  give  all  this 
protection  to  those  kindred  who  may  be  dependent  upon  him  and  who  do 
not  share  in  the  government  compensation.  Under  the  present  laws  monthly 
service  pensions  range  from  $12  to  $30  for  a  man,  and  $8  for  the  widow, 
and  $2  for  a  child. 

The  bureau  is  further  empowered  to  give  information  to  the  men  and  to 
act  for  them  in  respect  to  their  outstanding  insurance.  In  this  way  many 
existing  policies  that  might  lapse  may  be  saved  by  prompt  payment  of  pre- 
miums out  of  the  man's  deposit. 

The  laws  and  experiences  of  other  countries  were  studied  and  used  in  the 
preparation  of  this  bill.  It  is  clearly  recognized  that  the  government  can 
offer  but  minimum  protection,  based  on  general  averages  throughout  the 
country,  and  that  in  many  states  and  large  cities,  especially,  supplemental 
grants  will  be  required.  State  and  municipal  legislation  may  be  expected  to 
meet  this  need. 

On  the  administrative  side  the  bill  provides  for  a  division  of  the  war  risk 
bureau  into  two  sections,  one  on  marine  and  seamen's  insurance,  the  other 
on  military  and  naval  insurance.  Each  division  is  to  have  a  commissioner 
under  the  direction  of  the  bureau. 

This,  in  general,  is  an  outline  of  the  proposed  measure.  We  are  not  rely- 
ing upon  the  volunteer  system  in  this  war.  We  are  drafting  men  and  com- 
pelling them  to  make,  if  necessary,  the  supreme  sacrifice  for  their  country. 
A  higher  obligation,  therefore,  rests  upon  the  government  to  mitigate  the 
horrors  of  war  for  the  fighting  men  and  their  dependents  in  so  far  as  it  is 
possible  to  do  so  through  compensations,  indemnities  and  insurance.  Less 
than  this,  a  just,  generous  and  humane  government  can  not  do.  We  must 
set  an  example  to  the  world,  not  alone  in  the  ideals  for  which  we  fight,  but 
in  the  treatment  we  accord  to  those  who  fight  and  sacrifice  for  us. 

The  proposed  provisions  for  the  men  and  their  dependents  should  not  be 


EFFECT   ON   LIFE   INSURANCE  125 

offered  as  gratuities  or  pensions,  and  they  should  not  be  deferred  until  the 
end  of  the  war.  The  wives  and  children,  the  dependent  mothers  and  fathers 
of  the  men  should  not  be  left,  as  in  previous  wars,  to  the  uncertain  charity 
of  the  communities  in  which  they  live.  The  minds  of  our  soldiers  and 
sailors  should  be  put  at  rest,  so  far  as  their  loved  ones  are  concerned,  by  the 
knowledge  that  they  will  be  amply  provided  for  by  their  government  as  a 
part  of  the  compensation  for  the  service  they  are  rendering-  to  their  country. 
In  like  manner,  they  should  know  in  advance  that  if  they  are  killed  in  battle, 
definite  and  just  provision  has  been  made  for  their  dependents,  and  that  if 
they  are  disabled,  totally  or  partially — if  they  come  back  armless,  legless, 
sightless  or  otherwise  permanently  injured — definite  provision  is  made  for 
them,  and  that  they  are  not  going  to  be  left  to  the  uncertain  chances  of 
future  legislation,  or  to  the  scandals  of  our  old  pension  system.  Every  man 
should  know  that  the  moment  he  is  enlisted  in  the  military  service  of  the 
government,  these  definite  guaranties  and  assurances  are  given  to  him,  not 
as  charity,  but  as  a  part  of  his  deserved  compensation  for  the  extra- 
hazardous occupation  into  which  his  government  has  forced  him. 

It  may  be  suggested  that  the  cost  of  this  system  is  too  great.  Personally, 
I  have  no  patience  with  such  a  suggestion ;  I  confess  that  I  have  only  com- 
passion for  it.  If,  under  this  measure,  the  annual  cost  of  doing  justice  to  our 
fighting  men  and  their  dependents  should  amount  to  five,  six  or  seven  hun- 
dred million  dollars  per  annum,  at  the  crest  of  the  load,  it  is  an  insignificant 
sum  as  compared  with  what  these  men  do  for  their  country  and  for  the 
world.  At  this  time  we  are  contemplating  expenditures  during  the  fiscal  year 
1918  of  more  than  $10,000,000,000  for  the  prosecution  of  the  war — for  the 
creation  of  armies  and  death-dealing  instruments  to  be  used  in  destroying 
enough  human  life  to  restore  peace  and  justice  in  the  world.  Shall  we 
hesitate  to  expend  $700,000,000  more  per  annum,  if  need  be — only  about 
6  per  cent  of  the  amount  we  propose  to  expend  for  purposes  of  the  war — 
for  the  protection  of  the  widows  and  orphans,  the  dependent  and  the  injured, 
who,  after  all,  make  the  greatest  sacrifices  of  any  part  of  our  people,  for  the 
safety,  security  and  honor  of  our  country? 

Furthermore,  it  must  be  borne  in  mind  that  the  government  will  not  escape 
those  expenditures  if  this  plan  of  compensation  and  insurance  should  be 
rejected,  because  the  pension  system  would  then  be  resorted  to,  and  the  cost 
would  likely  exceed  that  of  the  proposed  plan.  At  the  same  time,  the  pen- 
sion system  would  not  provide  the  same  benefits,  nor  cover  the  subject  in 
the  same  comprehensive,  humane  and  equitable  way.  No  provision  is  made 
under  our  pension  laws  for  family  allowances  while  the  men  are  at  the  front, 
nor  for  rehabilitation,  life  insurance,  etc. 

The  chief  provisions  of  the  act  so  far  as  they  refer  to  life 
insurance  are : 

First,  the  appropriation  of  $23,000,000  which,  with  the 
premiums  received  on  the  policies,  constitutes  the  fund  from 
which  claims  are  to  be  paid  during  the  first  year.     There  has 


126  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

been  considerable  disagreement  as  to  the  adequacy  of  this  fund, 
due  to  the  impossibility  of  predicting  what  the  death  losses  will 
be,  but  in  any  event  the  credit  of  the  United  States  is  pledged 
and  the  claims  will  be  paid. 

Second,  a  definition  of  what  constitutes  "  marriage,"  a  defini- 
tion of  "  child,"  "  wife,"  "  divorced,"  and  other  terms  about 
which  uncertainty  or  disagreement  might  arise  in  connection 
with  the  payments  of  the  insurance. 

Third,  the  provision  of  a  fine  of  $5,000  or  imprisonment  for 
not  more  than  two  years  for  perjury  in  obtaining  family  allow- 
ance, compensation,  or  insurance. 

Fourth,  the  granting  of  insurance  without  a  medical  examina- 
tion to  every  commissioned  officer  and  enlisted  man  swid  every 
member  of  the  Army  Nurse  Corps  (female),  and  Navy  Nurse 
Corps  (female),  under  the  following  conditions: 

(a)  The  insurance  is  granted  upon  application  in  amounts 

of  not  less  than  $1,000  or  more  than  $10,000. 

(b)  It  is  insurance  against  death  or  total  permanent  dis- 

ability. 

(c)  Such  insurance  must  be  applied  for  within  one  hun- 

dred and  twenty  days  after  enlistment,  or  after  en- 
trance into  or  employment  in  the  active  service,  and 
before  discharge  or  resignation,  except  that  those 
"  in  the  active  service,  on  or  after  the  sixth  day  of 
April,  nineteen  hundred  and  seventeen,  and  who 
while  in  such  service  and  before  the  expiration  of 
one  hundred  and  twenty  days  from  and  after  the 
publication  of  the  act"  become  disabled  or  die,  shall 
be  deemed  "  to  have  applied  for  and  to  have  been 
granted  such  insurance." 

Fifth,  the  proceeds  of  the  insurance  are  payable  in  case  of 
death  or  disability  in  instalments  and  not  as  a  lump  sum. 

Sixth,  the  insurance  is  not  assignable,  nor  is  it  subject  to  the 
claims  of  creditors  of  the  insured,  or  of  the  beneficiary. 

Seventh,  provisions  are  made  for  maturity  of  the  policy  of 


EFFECT    ON    LIFE    INSURANCE  \2'J 

insurance  at  certain  ages,  as  well  as  for  cash,  loans,  paid-up 
and  extended  values,  dividends  from  gains  and  savings  and 
"  such  other  provisions  for  the  protection  and  advantage  of 
the  insured  and  beneficiaries  as  may  be  found  to  be  reasonable 
and  practicable."  This  extract  from  the  law  indicates  one  of 
its  leading  characteristics,  namely,  the  large  discretion  which  is 
given  to  its  administrators.  This  feature  of  the  law  was  clearly 
recognized  by  the  framers  of  it.  The  whole  plan  is  so  new 
and  the  contingencies  which  may  arise  so  numerous,  that  it 
seemed  unwise  to  attempt  to  specify  in  many  particulars.  The 
principle  of  entrusting  large  responsibility  and  discretion  to 
administrative  officers  in  times  of  peace  is  increasingly  used  and 
the  results  achieved  warrant  the  application  of  the  principle  in 
these  special  circumstances. 

Eighth,  the  premium  calculations  are  made  on  the  basis  of  the 
American  Experience  Table  with  an  interest  of  33^  per  cent. 

Ninth,  the  United  States  bears  all  the  expenses  of  administra- 
tioii  and  the  excess  mortality  and  disability  resulting  from  the 
war.  The  premium  rates  are,  therefore,  the  net  rates  of  the 
American  Experience  Table  of  Mortality,  with  an  interest  ac- 
•cumulation  of  3^/2  per  cent. 

Tenth,  the  insurance  during  the  period  of  the  war  is  term 
insurance  for  successive  terms  of  one  year;  that  is,  it  is  one 
year,  renewable,  term  insurance  during  the  period  of  the  war. 
This  is  the  kind  of  insurance  under  which  no  reserve  is  accumu- 
lated, and  therefore  no  cash  surrender  values.  It  is  insurance 
year  by  year,  and  the  cost  is  paid  for  each  year.  Since  with 
increasing  age  the  risk  increases,  the  premium  on  such  insurance 
increases  each  year,  although  in  the  early  ages  this  increase  is 
not  marked.  No  physical  examination  is  required  upon  applica- 
tion, nor  is  any  such  examination  required  year  by  year.  Term 
insurance  is  for  all  practical  purposes  temporary  insurance,  since 
the  cost  throughout  life  increases  so  much  and  since  few  are  able 
to  pay  increasing  costs  with  increasing  age.  It  is  assumed  on 
the  part  of  private  companies,  as  well  as  by  the  buyer,  when 
this  kind  of  insurance  is  sold,  that  such  insurance  either  will 


128  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

be  dropped  after  a  few  years,  or  will  be  transferred  into  one 
of  the  regular  life,  limited  payment,  or  endowment  policies. 

This  law  provides  that  not  later  than  five  years  after  the  close 
of  the  war,  this  term  insurance  will  be  converted  without  medical 
examination  "  into  such  form  or  forms  of  insurance  as  may  be 
prescribed  by  regulations,  and  as  the  insured  may  request,"  but 
that  such  "  regulations  shall  provide  for  the  right  to  convert  into 
ordinary  life,  twenty-payment  life,  endowment  maturing  at  age 
sixty-two  and  into  other  usual  forms  of  insurance."  This 
extract  illustrates  again  the  wide  discretion  which  is  left  to  the 
administrators  of  the  law. 

It  will  be  understood  that  the  above  provision  of  the  law  con- 
templates the  maturing  of  these  contracts  of  insurance  by  the 
United  States  Government.  This  means,  of  course,  that  the 
United  States  will  conduct  for  many  years  public  insurance. 
Some  of  these  contracts  will  not  mature  for  over  half  a  century. 
Then,  too,  it  must  be  recognized  that  after  the  close  of  the  war, 
there  will  be  in  the  regular  army  and  navy,  men  in  active  service 
and  entering  for  service.  These  soldiers  and  sailors  will  be 
eligible  for  insurance  under  the  provisions  of  the  law.  This 
may  well  mean  that  the  United  States  will  conduct  an  active 
insurance  organization  in  time  of  peace  to  serve  the  needs  of 
those  whose  insurability  is  decreased  from  the  standpoint  of 
the  private  insurance  companies,  because  of  service  of  this  char- 
acter with  the  nation. 

The  relation  of  the  law  to  the  pension  system  is  in  this  con- 
nection clear.  It  is  intended  that  the  various  provisions  of  the 
law  shall  make  it  unnecessary  to  utilize  the  old  types  of  pensions 
of  all  kinds.  It  is  to  be  hoped  in  view  of  the  history  of  the 
pension  system  in  the  United  States  that  this  will  be  the  result. 
But  in  view  of  some  of  the  chapters  in  this  history,  such  an 
end  may  not  be  achieved.  If,  when  the  thousands,  and  probably 
millions,  of  soldiers  and  sailors  return,  it  is  found  that  in  the 
cases  of  many  of  those  who  have  transferred  their  term  insur- 
ance to  the  regular  forms  the  burden  of  paying  the  premiums 
becomes  great  as  old  age  approaches,  a  grateful  and  patriotic 


EFFECT    ON    LIFE   INSURANCE 


129 


nation  may  well  insist  that  these  premiums  be  paid  from  the 
state  treasury.  Or  perchance  a  political  party,  seeking  power, 
may  as  in  the  past  dilute  its  patriotism  with  practical  political 
strategy  and  favor  such  a  practice.  In  either  case,  the  result 
would  be  practically  the  same  as  a  pension,  and  would  certainly 
have  many  of  the  evils  of  the  old  pension  system. 

The  Director  of  the  Bureau  of  War  Risk  Insurance  under 
the  provisions  of  the  law  issued  policies  and  other  regulations, 
and  the  following  policy,  rates  and  regulations  were  placed  in 
operation : 


Terms  and  Conditions  of  Soldiers'  and  Sailors'  Insurance  ^ 

I,  William  C.  De  Lanoy,  Director  of  the  Bureau  of  War  Risk  Insurance 
in  the  Treasury  Department,  pursuant  to  the-  provisions  of  Section  402  of 
an  act  "  to  amend  '  An  act  to  authorize  the  establishment  of  a  Bureau  of 
War  Risk  Insurance  in  the  Treasury  Department,'  approved  September  2, 
1914,  and  for  other  purposes,"  approved  October  6,  1917,  hereby,  on  this  15th 
day  of  October,  19 17,  by  direction  of  the  Secretary  of  the  Treasury,  deter- 
mine upon  and  publish  these  full  and  exact  terms  and  conditions  of  the  con- 
tract of  insurance  to  be  made  under  and  by  virtue  of  the  Act : 

I.  Insurance  will  be  issued  for  any  of  the  following  aggregate  amounts 
upon  any  one  life: 


Amount 
$1,000. .. 
$1,500... 
$2,000. . . 
$2,500. . . 
$3,000. . . 
$3,500. . . 
$4,000..-. 
$4.500. . . 
$5,000. .. 
$5,500... 


Converted 
into  Monthly 
Instalments  of 

$5-75 
8.63 
11.50 
14.38 
17.25 
.20.13 
23.00 
25.88 
28.75 
31.63 


Amount 

$6,000. 

$6,500. 

$7,000. 

$7,500. 

$8,000. 

$8,500. 

$9,000. 

$9,500. 
$10,000. 


Converted 
into  Monthly 
Instalments  of 

$34.50 
37.38 
40.25 

43-13 
46.00 
48.88 
SI.75 
54.63 
57.50 


Which  instalments  will  be  payable  during  the  total  and  permanent  disability 
of  the  insured,  or  if  death  occur  without  such  disability,  for  240  months,  or 
if  death  occur  following  such  disability,  for  a  sufficient  nuniber  of  months 
to  make  240  in  all  including  months  of  disability  already  paid  for,  in  both 
cases  except  as  otherwise  provided. 

'  The  Economic  World,  n.  s.,  vol.  xiv,  No.  16,  p.  561. 


I30 


EFFECTS    OF    THE    WAR    UPON    INSURANCE 


2.  The  insurance  is  issued  at  monthly  rates  for  the  age  (nearest  birthday) 
of  the  insured  when  the  insurance  goes  into  effect,  increasing  annually  upon 
the  anniversary  of  the  policy  to  the  rate  for  an  age  one  year  higher,  as  per 
the  following  table  of  rates : 


Age  $i,ooo  $1 

,500 

$2,000 

$2,500 

$3,000 

$3,500 

$4,000 

$4,500 

$5,000 

$5,500 

15 

...   .63 

•95 

$1.26 

$1.58 

$1.89 

$2.21 

$2.52 

$2.84 

$3.15 

$3.47 

i6 

...   .63 

■95 

1.26 

1.58 

1.89 

2.21 

2.52 

2.84 

3-15 

3.47 

17 

...   .63 

.95 

1.26 

1.58 

1.89 

2.21 

2.52 

2.84 

3-15 

3-47 

i8 

...   .64 

.96 

1.28^ 

1.60 

1.92 

2.24 

2.56 

2.88 

3.20 

3.52 

19 

...   .64 

.96 

1.28 

1.60 

1.92 

2.24 

2.56 

2.88 

3-20 

3-52 

20 

...   .64 

.96 

1.28 

1.60 

1.92 

2.24 

2.56 

2.88 

3-20 

3.52 

21 

...   .65 

.98 

1.30 

1.63 

1.95 

2.28 

2.60 

2.93 

325 

3.58 

22 

...   .65 

.98 

1.30 

1.63 

1.95 

2.28 

2.60 

2.93 

3.25 

3.58 

23 

...   .65 

.98 

1.30 

1.63 

1-95 

2.28 

2.60 

2.93 

325 

3.58 

24 

...   .66 

.99 

1.32 

1.65 

1.98 

2.31 

2.64 

2.97 

3.30 

3.63 

25 

...   .66 

•99 

1.32 

1.6s 

1.98 

2.31 

2.64 

2.97 

3.30 

3.63 

26 

...   .67 

[.01 

1.34 

1.68 

2.01 

2.35 

2.68 

3.02 

3-35 

3.69 

27 

...   .67 

[.01 

1-34 

1.68 

2.01 

2.35 

2.68 

3.02 

3.35 

3.69 

28 

...   .68 

1.02 

1.36 

1.70 

2.04 

2.38 

2.72 

306 

t3.40 

3.74 

29 

...   .69 

[.04 

1.38 

1.73 

2.07 

2.42 

2.76 

3.11 

3.45 

3.80 

30 

...   .69 

[.04 

1.38 

i.73 

2.07 

2.42 

2.76 

3.11 

3.45 

3.80 

31 

.70 

[.OS 

1.40 

1.75 

2.10 

2.45 

2.80 

3.15 

3.50 

3.8s 

32 

...   .71 

1.07 

1.42 

1.78 

2.13 

2.49 

2.84 

3-20 

3-55 

3.91 

33 

...   .72 

[.08 

1.44 

1.80 

2.16 

2.52 

2.88 

3.24 

3.60 

3.96 

34 

...   .73 

[.10 

1.46 

1.83 

2.19 

2.56 

2.92 

3.29 

3.65 

4.02 

35 

...   .74 

[.II 

1.48 

1.85 

2.22 

2.59 

2.96 

3-33 

3-70 

4.07 

36 

...   -75 

[.13 

1.50 

1.88 

2.25 

2.63 

300 

3.38 

3.75 

4.13 

37 

...   .76 

[.14 

1.52 

1.90 

2.28 

2.66 

304 

3.42 

3.80 

4.18 

38 

...  .77 

[.16 

1.54 

1-93 

2.31 

2.70 

3.08 

3-47 

3.85 

4.24 

39 

...      .79 

[.19 

1.58 

1.98 

2.37 

2.77 

3.16 

3.56 

3.95 

4.35 

40 

...   .81 

1.22 

1.62 

2.03 

2.43 

2.84 

3-24 

3.65 

4.05 

4.46 

41 

...   .82 

t.23 

1.64 

2.05 

2.46 

2.87 

3.28 

3.69 

4.10 

4.51 

42 

...   .84 

[.26 

1.68 

2.10 

2.52 

2.94 

3.36 

3.78 

4.20 

4.62 

43 

...   .87 

[.31 

1.74 

2.18 

2.61 

3.05 

3-48 

3.92 

4-35 

4.79 

44 

...   .89 

[.34 

1.78 

2.23 

2.67 

3-12 

3.56 

4.01 

4.45 

4.90 

45 

.92 

[.38 

1.84 

2.30 

2.76 

3.22 

3-68 

4.14 

4.60 

5.06 

46 

•••   .95 

[.43 

1.90 

2.35 

2.85 

3.33 

3.80 

4.28 

4.75 

5.23 

47 

...   .99   J 

.49 

1.98 

2.48 

2.97 

3.47 

396 

4.46 

4-95 

5.45 

48 

. . .  1.03 

[.55 

2.06 

2.58 

309 

3.61 

4.12 

4.64 

5.15 

5.67 

49 

. . .  1.08   ] 

[.62 

2.16 

2.70 

3-24 

3.78 

432 

4.86 

5.40 

5.94 

50 

...  1. 14   ] 

■71 

2.28 

2.85 

3-42 

3.'99 

4-56 

5.13 

5.70 

6.27 

51 

. . .  1.20   ] 

.80 

2.40 

300 

360 

4.20 

4.80 

5-40 

6.00 

6.60 

52 

...  1.27   ] 

.91 

2.54 

3.18 

3-81 

4-45 

5.08 

5.72 

6.35 

6.99 

53 

. . .  1.35  ■ 

J.03 

2.70 

3.38 

4-05 

4.73 

5-40 

6.08 

6.75 

7-43 

54 

..^    1.44   i 

2.16 

2.88 

3.60 

4-32 

5.04 

5.76 

6.48 

7.20 

7.92 

55 

...  1.53   i 

2.30 

3.06 

3.83 

4.59 

5.36 

6.12 

6.89 

7.65 

8.42 

56 

. . .  1.64   i 

2.46 

3.28 

4.10 

4.92 

5.74 

6.56 

7.38 

8.20 

9.02 

57 

...  1.76   i 

1.64 

3.52 

4.40 

5.28 

6.16 

7.04 

7.92 

8.80 

9.68 

58 

...  1.90   : 

J.85 

3.80 

4-75 

570 

6.65 

7.60 

8.55 

9.50 

10.45 

59 

...  2.05  : 

}.o8 

4.10 

5.13 

6.IS 

7.18 

8.20 

9.23 

10.25 

11.28 

60 

...  2.21  : 

5.32 

4.42 

5-53 

6.63 

7.74 

8.84 

9.95 

11.05 

12.16 

61 

. . .  2.40  : 

5.60 

4.80 

6.00 

7.20 

8.40 

9.60 

10.80 

12.00 

12.20 

62 

. . .  2.60  ; 

5.90 

5.20 

6.50 

7.80 

9.10 

10.40 

11.70 

13.00 

14.30 

63 

...  2.82  . 

\-23 

5.64 

7.05 

8.46 

9.87 

11.28 

12.69 

14.10 

15.51 

64 

...  3.07  ' 

i.6i 

6.14 

7.68 

9.21 

10.75 

12.28 

13.82 

15.35 

16.89 

65 

...  3.35  . 

5.03 

6.70 

8.38 

10.05 

11.73 

13.40 

15-08 

16.75 

18.43 

EFFECT    ON    LIFE   INSURANCE  I3I 


Age       $6,coo 

$6,500 

$7,000 

$7,500 

$8,000 

$8,500 

$9,000 

$9,500 

$10,000 

15 

...     $3.78 

$4.10 

$4.41 

$4-73 

$5-04 

$5-36 

$5-67 

$5-99 

$6,30 

16 

...       3.78 

4.10 

4.41 

4-73 

5-04 

5.36 

5.67 

5-99 

6.30 

17 

...       3.78 

4.10 

4.41 

4-73 

5-04 

5-36 

5-67 

5-99 

6.30 

18 

. . .       3-84 

4.16 

4.48 

4.80 

5-12 

5-44 

5-76 

6.08 

6.40 

19 

...       384 

4.16 

4.48 

4.80 

5.12 

5-44 

5.76 

6.08 

6.40 

20 

. . .       3.84 

4.16 

4.48 

4.80 

5.12 

5-44 

5.76 

6.08 

6.40 

21 

...       390 

423 

4.55 

4.88 

S-20 

5.53 

5-85 

6.18 

6.50 

22 

...       3.90 

423 

4.55 

4.88 

5-20 

5.53 

5-85 

6.18 

6.50 

23 

...       3.90 

423 

4-55 

4.88 

5-20 

5-53 

5-85 

6.18 

6.50 

24 

...       2>.Q^ 

4.29 

4.62 

4-95 

5.28 

5-61 

5-94 

6.27 

6.60 

25 

....       3.96 

4.29 

4.62 

4-95 

5.28 

5.61 

5-94 

6.27 

6.60 

26 

4.02 

4.36 

4.69 

503 

s-36 

5-70 

6.03 

6.37 

6.70 

21 

4.02 

4-36 

4.69 

5-03 

5-36 

5-70 

6.03 

6.37 

6.70 

28 

. . .       4.08 

4.42 

4.76 

S.io 

5-44 

5-78 

6.12 

6.46 

6.80 

29 

4.14 

4-49 

4.83 

S.18 

5.52 

5-87 

6.21 

6.56 

6.90 

30 

...       4.14 

4-49 

4.83 

5-18 

5-52 

5.87 

6.21 

6.56 

6.90 

31 

4.20 

4-55 

490 

S.25 

S-6o 

5-95 

6.30 

6.65 

7.00 

32 

4.26 

4.62 

4-97 

5-33 

5-68 

6.04 

6.39 

6.75 

7.10 

33 

• . .       4.32 

4.68 

5.04 

S-40 

5.76 

6.12 

6.48 

6.84 

7.20 

34 

. . .       4.38 

475 

5.1 1 

548 

5-84 

6.21 

6.57 

6.94 

7-30 

35 

...       4.44 

4.81 

5.18 

5-55 

5-92 

6.29 

6.66 

7-03 

7.40 

36 

. . .       4-50 

4.88 

5-25 

S.63 

6.00 

6.38 

6.75 

7-13 

7-50 

37 

. . .       4.56 

4-94 

5.32 

570 

6.08 

6.46 

6.84 

7.22 

7.60 

38 

4.62 

5.01 

5-39 

5.78 

6.16 

6.55 

6.93 

l-Z-z 

7-70 

39 

. . .       4-74 

5.14 

5-53 

5-93 

6.32 

6.72 

7-1 1 

7.51 

7.90 

40 

...       4-86 

5.27 

5.67 

6.08 

6.48 

6.89 

7-29 

7.70 

8.10 

41 

. . .       4-92 

5-33 

5-74 

6.15 

6.56 

6.97 

7-38 

7-79 

8.20 

42 

. . .       5-04 

546 

5-88 

6.30 

6.72 

7-14 

7.56 

7.98 

8.40 

43 

5-22 

5.66 

6.09 

6.53 

6.96 

7.40 

7-83 

8.27 

8.70 

44 

• . .       5-34 

5-79 

6.23 

6.68 

7.12 

7-57 

8.01 

8.46 

8.90 

45 

. . .       5-52 

5.98 

6.44 

6.90 

7-36 

7.82 

8.28 

8.74 

9.20 

46 

. . .       5-70 

6.18 

6.65 

7-13 

7.60 

8.08 

8.55 

9-03 

•9-50 

47 

•  •  •       5-94 

6.44 

6.93 

7.43 

7-92 

8.42 

8.91 

9.41 

9-90 

48 

...       6.18 

6.70 

7.21 

773 

8.24 

8.76 

9.27 

9-79 

10.30 

49 

. . .       6.48 

7.02 

7.56 

8.10 

8.64 

9.18 

9-72 

10.26 

10.80 

SO 

. . .       6.84 

7-41 

7.98 

8.55 

9.12 

9-69 

10.26 

10.83 

11.40 

51 

7.20 

7.80 

8.40 

9.00 

9.60 

10.20 

10.80 

11.40 

12.00 

52 

7.62 

8.26 

8.89 

9-53 

10.16 

10.80 

11-43 

12.07 

12.70 

53 

8.10 

8.78 

9-45 

10.13 

10.80 

11.48 

12.15 

12.83 

13-50 

54 

. . .       8.64 

936 

10.08 

10.80 

11.52 

12.24 

12.96 

13-68 

14-40 

55 

...       918 

9-95 

10.71 

11.48 

12.24 

1301 

13-77 

14-54 

15.30 

S6 

. . .       9.84 

10.66 

11.48 

12.30 

13-12 

13-94 

14-76 

15-58 

16.40 

57 

. . .     10.56 

11.44 

12.32 

13-20 

14.08 

14.96 

15.84 

16.72 

17.60 

58 

...     11.40 

12.35 

13.30  . 

14.2s 

15-20 

16.15 

17.10 

18.05 

19.00 

59 

. . .     12.30 

1333 

14-35 

15-38 

16.40 

17-43 

18.45 

19.48 

20.50 

60 

. . .     13.26 

1437 

15.47 

16.58 

17-68 

18.79 

19.89 

21.00 

22.10 

61 

. . .     14.40 

15.60 

16.80 

18.00 

19.20 

20.40 

21.60 

22.80 

24.00 

62 

. . .     15.60 

16.90 

18.20 

19.50 

20.80 

22.10 

23.40 

24.70 

26.00 

63 

. . .     16.92 

18.33 

19.74 

2X.15 

22.56 

2397 

25-38 

26.79 

28.20 

64 

. . .     18.42 

19.96 

21.49 

23.03 

24-.=!6 

26.10 

27.63 

29.17 

30.70 

65 

. . .     20.10 

21.78 

23.4s 

25-13 

26.80 

28.48 

30.15 

31-83 

33.50 

Rates  at  ages  higher  or  lower  will  be  given  on  request. 
The  insurance  may  be  continued  at  these  increasing  term  rates  during  the 
war  and  for  not  longer  than  five  years  after  the  termination  of  the  war, 


132  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

and  may  be  continued  thereafter  without  medical  examination  if  the  policy 
be  converted  into  a  form  selected  before  the  expiration  of  such  five  years 
by  the  insured  from  the  forms  of  insurance  which  will  be  provided  by 
the  bureau,  provided  that  premiums  are  paid  therefor  at  net  rates  com- 
puted by  the  bureau  according  to  the  American  Experience  Table  of  Mor- 
tality and  interest  at  3^^  per  cent  per  annum. 

3.  That  the  insurance  has  been  granted  will  be  evidenced  by  a  policy  or 
policies  issued  by  the  bureau,  which  shall  be  in  the  following  general  form 
(which  form  may  be  changed  by  the  bureau  from  time  to  time,  provided 
that  full  and  exact  terms  and  conditions  thereof  shall  not  be  altered  thereby)  : 

[Form  of  Policy  for  $5000] 

Military  and  Naval  Insurance  Policy 

No.  I 

Amount,  $5000  Age,  25  Monthly  instalments,  $28.75 

The  United  States  of  America 

Treasury  Department 
Bureau  of  War  Risk  Insurance 

Under  the  authority  granted  by  Congress  in  an  act  amending  "  An  act 
entitled  '  An  act  to  authorize  the  establishment  of  a  Bureau  of  War  Risk 
Insurance  in  the  Treasury  Department,'  approved  September  2,  1914,  and 
for  other  purposes,"  approved  October  6,  191 7,  and  subject  in  all  respects 
to  the  provisions  of  such  Act,  of  any  amendments  thereto,  and  of  all  regula- 
tions thereunder,  now  in  force  or  hereafter  adopted,  all  of  which,  together 
with  this  policy,  the  application  therefor,  and  the  terms  and  conditions  pub- 
lished under  authority  of  the  act,  shall  constitute  the  contract : 

Hereby  insures  from  and  after  the  day  of  ,  19..,  John  Doe, 

of  Illinois,  private.  Company  A,  Third  Infantry  [Name,  State  of  residence, 
and  designation  of  the  insured],  conditioned  upon  the  payment  of  premiums 
as  herein  provided,  for  the  principal  amount  of  $5000,  converted  into  monthly 
instalments  of  $28.75  (the  equivalent,  when  paid  for  240  months,  of  the  sum 
insured,  on  the  basis  of  interest  at  the  rate  of  3>^  per  cent  per  annum) 
payable 

To  the  insured,  if  he/she,  while  this  insurance  is  in  force,  shall  become 
totally  and  permanently  disabled,  commencing  with  such  disability  as  estab- 
lished by  the  award  of  the  director  of  the  bureau  and  continuing  during  such 
disability ;  and 

To  the  beneficiary  or  beneficiaries  hereinafter  designated,  commencing 
upon  the  death  of  the  insured,  while  the  insurance  is  in  force,  and  (except 
as  otherwise  provided)  continuing  for  240  months  if  no  instalments  have 
been  paid  for  total  and  permanent  disability  or,  if  any  such  instalments  have 
been  paid,  then  for  a  number  of  months  sufficient  to  make  240  in  all : 

To  Sarah  Doe,  wife  of  the  insured ; 

If  no  beneficiary  within  the  permitted  class  be  designated  by  the  insured, 
either  in  the  insured's  lifetime  or  by  his  last  will  and  testament,  or  if  any 


EFFECT   ON   LIFE   INSURANCE  I33 

above  designated  beneficiary  is  or  becomes  disqualified  or  does  not  survive 
the  insured,  the  insurance  (or  if  any  above  designated  beneficiary  shall  sur- 
vive the  insured,  but  shall  not  receive  all  the  instalments,  then  the  remaining 
instalments)  shall  be  payable  to  such  person  or  persons  within  the  permitted 
class  of  beneficiaries  as  would  under  the  laws  of  the  insured's  place  of  resi- 
dence be  entitled  to  his  personal  property  in  case  of  intestacy. 

If  the  insured  became  totally  and  permanently  disabled  before  this  policy 
was  applied  for,  it  shall  nevertheless  be  effective  as  life  insurance,  but  not 
as  insurance  against  such  disability. 

This  policy  is  not  assignable,  and  payments  thereunder  to  the  insured  or 
a  beneficiary  are  not  subject  to  claims  of  creditors  of  the  insured  or  bene- 
ficiary. 

The  insured  may  at  any  time,  subject  to  the  regulations  of  the  bureau, 
change  the  beneficiary  or  beneficiaries  to  any  person  or  persons  within  the 
classes  permitted  by  the  act,  without  the  consent  of  the  beneficiary  or 
beneficiaries. 

Upon  the  written  request  of  the  insured,  accompanied  by  this  policy  for 
indorsement,  or  after  his/her  death,  upon  request  of  a  beneficiary  at  the 
time  of  making  claim,  the  insurance  payable  to  any  beneficiary  may  be  con- 
verted into  instalments  of  reduced  amounts  payable  for  240  months  certain 
and  for  as  much  longer  as  such  beneficiary  shall  survive,  such  instalments  to 
be  computed  in  accordance  with  the  American  Experience  Table  of  Mor- 
tality and  31/2  per  cent  interest. 

Premiums  shall  be  paid  monthly  on  or  before  the  last  day  of  each  cal- 
endar month  and  will,  unless  the  insured  otherwise  elects  in  writing,  be 
deducted  from  any  pay  due  him/her  from  the  United  States  or  deposit  by 
him/her  with  the  United  States,  and,  if  so  to  be  deducted,  a  premium  when 
due  will  be  treated  as  paid,  whether  or  not  such  deduction  is  in  fact  made, 
if  upon  the  due  date  the  United  States  owe  him/her  on  account  of  pay  or 
deposit  an  amount  sufficient  to  provide  the  premium,  provided  that  the  pre- 
mium may  be  paid  within  thirty-one  days  after  the  expiration  of  the  month, 
during  which  period  of  grace  the  insurance  shall  remain  in  full  force.  If 
any  premium  be  not  paid,  either  in  cash  or  by  deduction  as  herein  provided, 
when  due  or  within  the  days  of  grace,  this  insurance  shall  immediately  ter- 
minate, but  may  be  teinstated  within  six  months  upon  compliance  with  the 
terms  and  conditions  specified  in  the  regulations  of  the  bureau. 

If  the  age  of  the  insured  has  been  misstated,  the  amount  of  insurance  shall 
be  adjusted  at  the  amount  not  in  excess  of  $10,000  which  the  premium 
actually  paid  would  purchase  at  the  insured's  attained  age. 

During  the  present  war  and  for  not  more  than  five  years  thereafter,  or 
until  the  earlier  conversion  of  this  policy  as  hereinafter  provided,  the 
monthly  premium  shall  be  in  accordance  with  the  following  table  of  rates, 
increasing  at  each  anniversary  of  the  policy  to  the  rate  for  his/her  then 
attained  age: 


134 


EFFECTS    OF   THE   WAR   UPON    INSURANCE 


Attained 
Age 

I5---- 
i6.... 
17.... 
18.... 
19.... 

20 

21 

22 

23.... 
24.... 
25.... 
26.... 
27.... 
28. . . . 
29.... 
30.... 
3I---- 
32.... 
23---- 
34.. • • 
35.--- 
36.... 
37.-.. 
38.... 
39.... 
40.... 


Table  of  Premiums  for  $5,000 
(Ages  15  to  65) 

Attained 


Monthly 
Rate 

. .  $3.15 

..  3.15 

.  3-15 

.  3-20 

.  3-20 

.  320 

.  3-25 

•  3-25 

•  3.25 

•  3-30 

•  3-30 

•  3-35 

•  3-35 

•  3.40 
■  3-45 

•  3.45 

•  3.50 

•  3-55 
.  3.60 

•  3.65 
.  370 

•  3-75 
..  3-80 

.  3.8s 

•  3-95 

•  4.0s 


Monthly 

Age  Rate 

41 $4.10 

42 4.20 

43- • 4.35 

44 4-45 

45 4.60 

46 475 

47 4-90 

48 5.1S 

49 5-40 

50 570 

51 6.00 

52 6.35 

53 6.75 

54 7-20 

55 7.65 

56 X. .  8.20 

57 8.80 

58 9-50 

59 10.25 

60 ii.os 

61 12.00 

62 13.00 

63 14-10 

64 15.35 

65 16.75 


Not  later  than  five  years  after  the  war  this  policy,  if  written  request  be 
made  to  the  bureau  therefor,  accompanied  by  this  policy,  will  be  converted 
without  medical  examination  into  any  form  of  insurance  selected  from  among 
those  that  may  be  prescribed  by  regulations  of  the  bureau.  Such  converted 
insurance  will  be  at  net  premiums,  computed  in  accordance  with  the  Ameri- 
can Experience  Table  of  Mortality  and  35^  per  cent  interest  per  annum  and 
will  provide  for  cash,  loan,  paid-up  and  extended  insurance  values. 

Wherefore  the  United  States  of  America  has  caused  this  policy  to  be 
signed  by  the  Secretary  of  the  Treasury  and  by  William  C.  De  Lanoy,  the 
Director  of  the  Bureau  of  War  Risk  Insurance,  and  countersigned  by  the 
registrar  or  an  assistant  registrar  of  the  bureau. 

W.  G.  McAdoo. 
William  C.  De  Lanoy,  Secretary  of  Treasury. 

Director  of  the  Bureau  of  War  Risk  Insurance. 

Countersigned  at  Washington,  D.  C,  this day  of , 

19 

,  Registrar. 

4.  Persons  entitled  to  apply  for  this  insurance  are : 

(i)  A  commissioned  officer  (including  a  warrant  officer)  in  active  service 
in  the  military  or  naval  forces  of  the  United  States. 

(2)    Any  person,  male  or  female,  enlisted,  enrolled  or  drafted  into  active 


EFFECT   ON   LIFE   INSURANCE  I35 

service  in  the  military  or  naval  forces  of  the  United  States,  including  non- 
commissioned and  petty  officers  and  members  of  training  camps  authorized  by 
law. 

The  term  "  military  or  naval  forces "  means  the  Army,  the  Navy,  the 
Marine  Corps,  the  Coast  Guard,  the  Naval  Reserves,  the  National  Naval 
Volunteers,  and  any  other  branch  of  the  United  States  service  while  serving 
pursuant  to  law  with  the  army  or  the  navy. 

(3)  Any  member  of  the  Army  Nurse  Corps  (female)  or  of  the  Navy 
Nurse  Corps  (female)  while  employed  in  active  service  under  the  War 
Department  or  Navy  Department,  respectively. 

5.  Insurance  may  be  applied  for  in  favor  of  one  or  more  of  the  following 
persons  with  sum  of  $500  or  a  multiple  thereof  for  each  beneficiary,  the 
aggregate  not  exceeding  the  limit  of  $10,000  and  not  less  than  $1000  upon  any 
one  life : 

Husband  or  wife. 

Child,  including  legitimate  child;  child  legally  adopted  before  April  6,  1917, 
or  more  than  six  months  before  enlistment  or  entrance  into  or  employment 
in  active  service,  whichever  date  is  the  later;  stepchild,  if  a  member  of  the 
insured's  household;  illegitimate  child,  but,  if  the  insured  is  his  father,  only 
if  acknowledged  by  instrument  in  writing  signed  by  him,  or  if  he  has  been 
judicially  ordered  or  decreed  to  contribute  to  such  child's  support,  and  if 
such  child,  if  born  after  December  31,  1917,  shall  have  been  born  in  the 
United  States  or  in  its  insular  possessions. 

Grandchild,  meaning  a  child,  as  above  defined,  of  a  child  as  above  defined. 

Parent,  including  father,  mother,  grandfather,  grandmother,  stepfather 
and  stepmother  either  of  the  insured  or  of  his/her  spouse. 

Brother  or  sister,  including  of  the  half  blood  as  well  as  of  the  whole  blood, 
stepbrothers  and  stepsisters  and  brothers  and  sisters  through  adoption. 

Unless  other  designation  is  made  by  the  insured,  such  person  or  persons, 
within  the  permitted  class  of  beneficiaries,  as  would  under  the  laws  of  the 
place  of  residence  of  the  insured  be  entitled  to  his  personal  property  in  case 
of  Intestacy  shall  be  deemed  designated  as  the  beneficiary  or  beneficiaries  to 
whom  shall  be  paid  any  instalments  remaining  unpaid  upon  the  death,  or 
disqualification  under  the  provisions  of  the  act,  of  any  named  beneficiary. 

6.  In  case  the  applicant  does  not  desire  the  premium  to  be  deducted  from 
his/her  pay  (or  his/her  deposit)  he/she  should  so  elect  in  writing  at  the 
time  of  making  application;  but  if  no  election  is  made  it  shall  have  the  effect 
to  provide  for  such  deduction  from  his/her  pay,  or  if  such  pay  be  insuflii- 
cient,  any  balance  from  his/her  deposit. 

7.  Applications  for  insurance  are  to  be  made  upon  the  blanks  provided  by 
the  bureau,  but  any  wri.ing  sufficiently  identifying  the  applicant  and  specify- 
ing the  amount  of  insurance  shall  be  deemed  sufficient.  Upon  request  of  the 
bureau,  however,  the  applicant  shall  fill  out  and  sign  the  proper  blank  as  of 
the  original  date. 

8.  If  a  signed  writing  requesting  insurance  for  less  than  $4500  is  mailed 
or  delivered  before  the  12th  day  of  February,  1918,  to  the  Bureau  of  War 
Risk  Insurance,  Washington,  D,  C,  or  to  any  branch  thereof  or  to  any  officer 


136 


EFFECTS   OF   THE    WAR   UPON    INSURANCE 


of  the  United  States  authorized  to  receive  the  same,  such  insurance,  in  the 
absence  of  other  specification  in  such  writing,  shall  be  and  be  deemed  applied 
for  and  the  contract  made  on  such  12th  day  of  February,  1918,  the  provi- 
sions of  Section  401  as  to  automatic  insurance  meanwhile  continuing  in  full 
force;  if  so  mailed  or  delivered  on  or  after  such  day,  or  if  for  $4500  or 
more,  though  mailed  or  delivered  before  such  day,  the  insurance  shall,  in 
the  absence  of  other  specification  in  such  writing,  be  and  be  deemed  applied 
for  and  the  contract  made  on  the  day  of  mailing  or  delivery. 

9.  These  terms  and  conditions  are  subject  in  all  respects  to  the  provisions 
of  such  act  and  of  any  amendments  thereto  and  of  all  regulations  there- 
under now  in  force  or  hereafter  adopted. 

William  C.  De  Lanoy, 
Director  of  the  Bureau  of  War  Risk  Insurance. 

Washington,  D.  C,  October  15,  1917. 


Form  2 


TREASURY  DEPARTMENT 
Bureau  of  War  Risk  Insurance 

Division  of 
Military  and  Naval   Insurance 

APPLICATION  FOR  INSURANCE 

My  full  name  is 

Home    address 

(No.  and  street  or  rural  route) 


(Cit}',  town  or  post  office)         (State) 

Date  of  birth Age 

(Month)         (Day)         (Year)         (Nearest  birthday) 

Present  rank Present  station Date  of  enlistment 

(Month)     (Day)     (Year) 

I  hereby  apply  for  insurance  in  the  sum  of  $ payable  to  myself  dur- 
ing permanent  total  disability  and  from  and  after  my  death  to  the  following 
persons  in  the  following  amounts : 


t. 

TJ 

■n 

0 

0 

0 

*< 

z 

c 

Z 

3 

c 
3 

(D 

or 

■^ 

0 

Relationship 


Name 
of  Beneficiary 


Post  Office  Address 

(a)  No.  and  street  or  rural 

route 

(b)  City,  town  or  post  office 

and   State 

(a)    

(b)    

(a)    

(b)    

(a)    

(b)    

(a)    

(b)    - 

(a)    

(b)    


Amount    of    Insur- 
ance for  each 
beneficiary 
(In  multiples  of 
$500  only) 


EFFECT   ON    LIFE   INSURANCE  I37 

In  case  any  beneficiary  die  or  become  disqualified  after  becoming  entitled 
to  an  instalment  but  before  receiving  all  instalments,  the  remaining  instal- 
ments are  to  be  paid  to  such  person  or  persons  within  the  permitted  class  of 
beneficiaries  as  would  under  the  laws  of  my  place  of  residence  be  entitled 
to  my  personal  property  in  case  of  intestacy. 

I  authorize  the  necessary  monthly  deduction  from  my  pay,  or  if  insuffi- 
cient, from  any  deposit  with  the  United  States,  in  payment  of  the  premiums 
as  they  become  due,  unless  they  be  otherwise  paid. 

If  this  application  is  either  for  more  than  $4000  insurance  or  is  signed  on 
or  after  February  12,  1918,  I  offer  it  and  it  is  to  be  deemed  made  as  of  the 
date  of  signature. 

If  this  application  is  for  less  than  $4500  insurance  and  in  favor  of  wife, 
child  or  widowed  mother  and  is  signed  before  February  12,  1918,  I  offer  it 
and  it  is  to  be  deemed  made  as  of  February  12,  1918. 

If  this  application  is  for  less  than  $4500  and  in  favor  of  some  person  or 
persons  other  than  wife,  child  or  widowed  mother  and  is  signed  before  Feb- 
ruary 12,  1918,  I  offer  it  and  it  is  to  be  deemed  made  as  of 

(  Date  of  Signature  )   o.  -i         .1-1  •        .         .   j 

•(  „  .  „   V  Strike  out  whichever  is  not  wanted. 

[  February  12,  191 8,  ) 

NOTE. — If  in  the  last  paragraph,  you  strike  out  "Date  of  Signa- 
ture" leaving  "February  12,  1918,"  the  law  gives  you  $25  a  month 
for  life  in  case  of  permanent  total  disablement  occurring  prior  to  such 
date  and  the  same  monthly  amount  to  your  wife,  child  or  widowed 
mother,  but  nothing  to  anyone  else  in  case  of  your  death  before  such 
date,  and  the  insurance  for  the  designated  beneficiary  other  than  wife, 
child  or  widowed  mother  is  effective  only  if  you  die  on  or  before  Feb- 
ruary 12,  1918. 

If  you  strike  out  "February  12,  1918,"  leaving  "Date  of  Signature," 
a  smaller  insurance  both  against  death  and  disability  takes  effect  at 
once,  but  is  payable  in  case  of  death  to  the  designated  beneficiary. 

Signed  at 

the day  of ,  191 

Witnessed  by  (Sign  here) 


The  situation  presented  by  this  law,  so  far  as  at  this  early  date 
its  ultimate  effects  can  be  known,  is  well  presented  by  an  author- 
ity as  follows :  ^ 

While  all  is  still  guesswork,  it  now  seems  not  unlikely  that  an  average  of 
at  least  $7500  for  each  officer  and  man  in  the  service  may  be  applied  for. 
If  this  guess  is  not  extravagant,  the  War  Risk  Bureau  will  have  on  its  books 
within  four  months  something  like  $15,000,000,000  of  soldiers'  and  sailors' 

'  Editorial  by  Arthur  Marsh  in  The  Economic  World,  n.  s.,  vol.  xiv.  No.  18, 
p.  632. 


138  EFFECTS    OF   THE   WAR   UPON   INSURANCE 

life  and  disability  insurances ;  while  if  it  becomes  necessary,  as  the  present 
war  situation  would  appear  to  indicate,  to  increase  the  country's  military 
and  naval  forces  to  5,000,000  men  or  more,  the  sum  total  of  the  outstanding 
insurances  might  be  raised  to  $30,000,000,000  or  even  perhaps  $40,000,000,000. 
This  last  amount  would  be  nearly  double  the  aggregate  of  the  outstanding 
insurances  of  the  existing  American  private  insurance  companies  at  the  end 
of  1916  (about  $24,600,000,000),  and  nearly  $10,000,000,000  in  excess  of  all 
the  outstanding  life  insurances  of  all  kinds  in  the  United  States  on  that  date, 
including  those  of  the  fraternal  benefit  associations.  In  fact,  it  would  not 
fall  so  very  far  below  the  sum  total  of  all  the  life  insurance  outstanding  in 
the  entire  world  at  the  present  time. 

Whether  or  not  the  sailors'  and  soldiers'  life  and  disability  insurances 
written  by  the  War  Risk  Bureau  ultimately  reach  an  aggregate  amount  so 
enormous  as  this,  it  seems  tolerably  certain  that  before  the  end  of  the  war 
they  will  have  outstripped  the  total  of  life  insurances  written  in  this  country 
by  private  agencies.  It  goes  without  saying  that  the  creation  of  so  unprece- 
dented an  amount  of  life  insurance  conducted  by  a  single  institution — and 
that  governmental  in  character — can  not  fail  to  have  powerful  eflf^cts  for  the 
private  companies.  These  effects,  too,  must  be  felt  for  a  very  long  period 
of  time,  much  more  than  an  ordinary  generation ;  for,  according  to  life  insur- 
ance experience,  more  than  three-quarters  of  a  century  will  have  elapsed 
before  the  last  of  the  youths  now  governmentally  insured  will  have  died. 

Although,  naturally,  the  obscurity  which  surrounds  the  future  action  of 
forces  so  vast  as  those  set  in  motion  by  a  scheme  of  this  magnitude,  is  far 
too  dense  to  make  it  possible  to  penetrate  deeply  into  the  matter  and  to 
answer  with  much  assurance  of  correctness  the  question  of  the  consequences 
that  will  be  found  in  the  long  run  to  flow  from  it.   .    .    . 

The  immediate  effects  of  the  government  insurance  upon  the  private  insti- 
tutions are  likely  to  be  of  much  less  consequence  than  the  future  effects ; 
and  yet  the  former  may  prove  to  be  not  inconsiderable.  The  chief  of  these 
immediate  effects  will  perhaps  be  the  cancelation  of  existing  policies  with 
the  private  companies,  in  order  that  the  maximum  of  the  government  insur- 
ance may  be  comfortably  carried.  ...  It  is  true,  to  be  sure,  that  but  a 
small  proportion  of  men  below  the  age  of  thirty — the  upper  age  limit  for 
the  rank  and  file  in  the  conscripted  army — have  reached  the  point  of  taking 
out  life  insurance  at  all ;  and  those  that  have  insured  themselves  have  as  a 
rule,  taken  only  very  moderate  amounts  of  insurance.  The  companies,  there- 
fore, would  be  exposed  to  no  great  amount  of  cancelations  on  the  part  of  the 
enlisted  men.  The  case  of  the  officers  is  somewhat  different,  since  there  is 
no  maximum  age  limitation  for  them,  and  in  fact  a  majority  of  them  belong 
to  the  ages  at  which  life  insurance  is  most  freely  taken  out,  so  that  the  sum 
total  of  the  officers'  insurances  exposed  to  cancelation  is  no  doubt  a  very 
respectable  amount.  Yet,  after  all,  it  is  improbable  that  the  companies  will 
lose  in  this  way  any  very  large  percentage  of  the  business  now  on  their 
books — and  it  may  well  be  that  they  would  prefer  to  lose  this,  rather  than 
have  to  meet  the  war  risk  exposure  upon  it. 

When  we  turn  from  the  immediate  to  the  future  effects  of  the  govern- 


EFFECT   ON   LIFE   INSURANCE  1 39 

ment  insurance  upon  the  business  of  the  private  companies,  that  future  effect 
which  is  most  clearly  discernible  is  the  probable  large  proportionate  reduction 
in  the  number  of  potential  policyholders  during  the  quarter-century  or  so 
following  the  war.  Should  our  military  and  naval  forces  be  brought  up  ta 
5,000,000  men  or  more,  and  should  the  great  majority  of  these  take  the  gov- 
ernment insurance  to  the  largest  extent  their  pay,  their  other  income  and 
the  resources  of  their  families  permit,  a  great  gap  would  be  made  in  the 
normally  expected  clientele  of  the  private  companies — assuming,  of  course,, 
that  the  insured  soldiers  and  sailors  upon  their  return  to  civil  life  avail 
themselves  of  the  privilege  of  converting  their  war  policies  into  one  or 
another  of  the  usual  forms  of  life  insurance.  That  such  conversion  will  be 
made  by  the  great  majority  of  those  thrifty  enough  to  carry  any  life  insur- 
ance at  all  seems  more  than  probable,  inasmuch  as  the  premium  rates  will 
contain  virtually  no  loading  for  commissions  and  but  a  light  loading  for 
expenses — and  consequently  will  be  lower  than  any  rates  feasible  for  private 
companies,  unless  the  latter  can  overcome  the  handicap  by  means  of 
unusually  high  investment  earnings. 

Here,  then,  as  it  appears  to  us,  is  a  very  real  problem,  which  the  private 
companies  must  face  in  the  future  as  a  result  of  the  soldiers'  and  sailors" 
life  and  disability  insurance. 

It  is  to  be  especially  noted  that  the  cost  of  this  insurance  to 
the  insured  is  very  moderate.  This  is  due  to  the  fact  that  the 
government  pays  all  the  administrative  expenses  and  bears  the 
excess  mortality.  The  insured  does  not  have  in  his  premium  any 
charge  for  the  agent's  commission,  the  examination  fee,  rent, 
offices  or  any  of  the  ordinary  costs  of  a  policyholder  in  a  regular 
private  insurance  company,  except  the  mortality  cost,  and  a  part 
of  this  is  borne  by  the  government.  The  applications  up  to 
December  i,  1917,  totaled  156,511,  calling  for  insurance  of 
$1,341,178,500.    This  is  an  average  of  $8,588  per  man. 

In  addition  to  this  life  insurance,  there  is  also  granted  another 
kind  of  insurance — disability — the  discussion  of  which  properly 
belongs  in  this  chapter  of  the  effects  of  the  war  on  insurance. 

As  is  generally  known,  it  has  become  the  practice  of  many 
life  insurance  companies  to  incorporate  in  their  regular  policies- 
of  life  insurance  a  clause  known  as  the  Disability  Clause,  which 
provides  that  in  case  of  the  permanent  and  total  disability  of 
the  insured,  no  further  premiums  are  required  of  him.  The 
policy  then  either  becomes  paid  up  and  is  paid  to  the  beneficiary 
on  the  death  of  the  insured,  or  is  paid  in  instalments. 


I40  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

Under  the  United  States  law  for  the  insuring  of  those  in 
military  and  naval  service,  compensation  is  paid  for  disability. 
The  compensation  is  on  a  monthly  basis  and  varies  from  $30 
to  $100  per  month,  in  case  of  total  disability,  the  amount  being 
adjusted  to  the  number  of  dependents  or  the  extent  of  the  dis- 
ability, as  in  the  case  of  the  loss  of  both  feet,  hands  or  eyes, 
when  the  rate  of  compensation  is  $100  per  month.  In  case 
the  disability  is  partial,  "  the  monthly  compensation  shall  be 
a  percentage  of  the  compensation  that  would  be  payable  for 
total  disability,  equal  to  the  degree  of  the  reduction  in  earning 
capacity  resulting  from  the  disability."  A  schedule  or  ratings 
of  reductions  in  earning  capacity  from  specific  injuries  or  com- 
binations of  injuries  of  a  permanent  nature  is  to  be  adopted  and 
applied  by  the  administrators  of  the  law.  In  addition  to  this 
compensation,  the  law  provides  further  that  such  reasonable 
medical,  surgical  and  hospital  services  shall  be  furnished  by  the 
United  States,  as  well  as  such  artificial  limbs,  trusses,  and  similar 
appliances,  as  "  the  director  may  determine  to  be  useful  and 
reasonably  necessary."  An  especially  interesting  and  important 
feature  of  the  disability  insurance  is  that  one  which  provides 
for  a  system  of  reeducation  for  those  cases  "  of  dismemberment, 
of  injuries  to  sight  or  hearing." 

The  government  provides  this  system  of  vocational  training 
and  reeducation  and  requires  the  insured  to  pursue  the  course 
of  training.  In  case  of  wilful  failure  to  do  so,  the  compensation 
is  suspended.  In  case  such  a  course  prevents  the  injured  person 
from  acquiring  a  substantially  gainful  occupation,  a  form  of 
enlistment  into  the  military  or  naval  service  may  be  required. 
This  enlistment  will  entitle  the  person  to  full  pay  on  the  basis 
of  the  last  month  of  his  active  service  and  his  family  to  family 
allowance  and  allotment  in  lieu  of  all  other  compensations  for 
the  time  being.  Just  what  use  would  be  made  of  these  partially 
disabled  persons  is  uncertain,  and  this,  like  many  other  sections 
of  the  law,  leaves  the  matter  open  for  later  administrative  regu- 
lation or  judicial  interpretation. 

The  good  features  of  this  unusual  experiment  in  government 


EFFECT    ON    LIFE   INSURANCE  I4I 

life  insurance  by  the  United  States  are  evident.  The  measure 
was  adopted  when  feelings  of  patriotism  were  at  a  high  point. 
There  was  a  disposition  to  be  impatient  with  those  who  opposed 
the  measure  and  perhaps  weaknesses  in  it  will  develop  because 
of  the  fact  that  it  was  not  subjected  to  the  normal  amount  of 
criticism  of  bills  in  times  of  peace  as  they  proceed  through 
Congress.  Few  cared  to  appear  as  wishing  to  treat  the  soldiers 
and  sailors  in  any  but  the  most  liberal  manner.  The  offering 
up  of  a  life  in  the  service  of  the  nation  does  not  easily  lend 
itself  to  the  counters  of  the  market  place,  and  to  many  the  most 
liberal  treatment  of  those  who  were  entering  the  active  war 
service  of  the  nation  seemed  but  an  inadequate  compensation 
for  the  risk  which  they  were  assuming.  Nevertheless,  these 
laudable  sentiments  of  those  instrumental  in  enacting  the  legis- 
lation and  those  silent  critics  will  not  do  away  with  the  purely 
practical  problems  which  will  arise  in  the  applying  of  the  law. 

Probable  Results  of  Government  Insurance 

The  results  may  ultimately  be  very  great.  If,  for  example, 
it  is  found  by  experience  that  the  government  can  successfully 
insure  four  or  five  millions  of  its  citizens  who  are  at  war,  it 
may  well  be  asked  why  it  can  not  insure  those  many  other 
millions  who  are  in  civil  life.  In  other  words,  the  act  may  result 
in  bringing  to  the  front,  as  a  practical  question,  government  life 
insurance  and  the  prohibition  of  private  life  insurance.  It  is 
not  suggested  that  this  would  be  a  public  calamity,  but  this 
example  is  given  as  only  one  of  the  many  practical  questions 
of  large  import  which  may  arise  as  a  result  of  this  public  insur- 
ance act. 

Other  questions  may  concern  themselves  with  the  administra- 
tion of  the  law  in  its  political  party  aspects.  Theoretically,  the 
government  ought  to  be  able  to  conduct  this  public  life  insurance 
organization  at  an  actually  lower  per  unit  Cost  for  the  overhead 
expenses,  even  if  such  elements  as  rent  and  interest  on  the  invest- 
ment were  allowed.    The  business  of  life  insurance  seems  to  be 


142  EFFECTS    OF   THE   WAR   UPON   INSURANCE 

one  subject  to  a  considerable  degree  to  the  principle  of  decreasing 
cost,  and  the  government  ought  to  be  in  position  to  take  peculiar 
advantage  of  this  principle.  However,  as  is  well  known,  prac- 
tical considerations  often  interfere  with  the  realization  of  the- 
oretical possibilities.  In  some  countries,  as,  for  example,  Aus- 
tralia, the  private  insurance  organizations  in  competition  with 
state  insurance  seem  to  have  been  able  to  supply  life  insurance 
on  as  advantageous  terms  as  the  public  organization. 


Ill 


THE  EFFECT  OF  THE  WAR  ON  SOCIAL 
INSURANCE  AND  PENSIONS 

No  other  form  of  insurance  was  receiving  more  attention 
preceding  the  war  than  the  so-called  social  insurance.  In  many 
respects,  all  forms  of  insurance  are  social,  and  the  term  "  social 
insurance  "  does  not  mean  the  same  thing  in  all  countries  or  to 
all  students  of  insurance.  It  may  be  defined  in  a  general  sense 
to  include  all  those  kinds  of  insurance  which  have  for  their 
purpose  the  securing  of  social  benefits  as  contrasted  with  benefits 
to  the  individual  and  which,  therefore,  have  in  their  conduct  a 
large  degree  of  governmental  participation,  either  as  minute 
supervision,  or  as  a  form  of  insurance  transacted  in  part  or  in 
whole  by  the  government.  The  specific  forms  of  insurance 
usually  included  under  the  term  "  social  insurance  "  are  work- 
men's compensation  for  death  or  injury  while  in  employment, 
unemployment,  sickness  and  old  age  insurance.  For  the  purpose 
of  this  discussion  of  the  effect  of  the  war  on  social  insurance, 
allowances  for  the  family  of  soldiers  and  sailors,  and  pensions 
will  be  included. 

Growth  of  Social  Insurance 

The  great  development  of  social  insurance  during  the  last 
quarter  of  a  century  has  been  due  to  a  number  of  causes. 

In  the  first  place,  there  has  been  an  undoubted  development  of 
what  may,  for  lack  of  a  better  term,  be  called  a  social  conscience; 
that  is  to  state,  society  has  increasingly  realized  that  in  the 
operation  of  the  prevailing  economic  system,  certain  costs  are 
entailed  which  are  properly  social  costs  instead  of  individual 
costs,  and  that  principles  of  justice  dictated  that  such  costs 
should  be  borne  by  society  as  increased  taxes  to  pay  in  whole 

M3 


144  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

or  in  part  the  cost  of  old  age  pensions,  invalidity,  and  compensa- 
tion insurance.  Or  the  cost  may  have  been  met  by  an  increased 
price  for  the  goods  and  services  produced  by  those  who  bene- 
fited directly  by  the  particular  form  of  insurance. 

In  the  second  place,  the  growth  of  representative  government 
in  most  of  the  leading  nations  and  the  increased  political  power 
of  the  wage  earners  have  furthered  the  development  of  social 
insurance. 

In  the  third  place,  social  insurance  has  shared  in  the  scientific 
development  of  business.  By  this  is  meant  that  in  the  improved 
organization  of  business  the  importance  of  the  role  which  labor 
plays  has  come  to  be  recognized,  and  it  is  good  business  to 
conserve  and  protect  this  labor  force.  »• 

In  the  development  of  social  insurance  the  governments  have 
had  a  large  part  and,  strange  as  it  may  seem,  at  first  thought, 
this  form  of  insurance  has  had  a  much  more  extensive  develop- 
ment in  the  European  nations  than  in  the  United  States.  In  the 
latter  country,  both  on  account  of  a  persisting  individualism  and 
the  relatively  higher  wages  and  greater  opportunities  for  the 
wage-earning  class,  the  adoption  of  social  insurance  has  lagged 
behind  that  of  Europe.  In  the  Australasian  countries,  on  the 
other  hand,  where  industrial  development  has  been  even  more 
recent  than  in  the  United  States,  such  insurance  has  had  a 
greater  development.  This  is  probably  due,  primarily,  to  the 
better  organization  of  the  labor  class  which  has  made  possible  the 
exertion  of  a  strong  influence  on  governmental  policy. 

Effect  of  War  on  Social  Insurance 

The  war  is  having  both  positive  and  negative  effects  on  social 
insurance.  In  the  former  respect,  it  is  causing  an  increased 
participation  by  the  governments  in  certain  forms  of  this  insur- 
ance, especially  that  having  for  its  purpose  the  aiding  of  families 
of  those  directly  engaged  in  the  service  of  the  nation.  If,  as 
seems  probable,  one  result  of  the  war  will  be  to  give  the  wage 
earners  an  increased  influence  in  government,  it  may  be  expected 


EFFECT   ON    SOCIAL    INSURANCE   AND   PENSIONS  I45 

that  this  form  of  insurance  will  have  a  marked  development  at 
their  hands. 

The  brunt  of  the  actual  warfare  is  being  borne  by  this  class 
in  society,  and  it  may  well  happen  that  they  will  insist  that  the 
particular  society  or  nation  "  saved "  by  their  sacrifices  shall 
bear  the  cost,  and  it  may  also  well  happen  that  the  social  aspect 
of  producing  goods  and  services  will  be  emphasized  if  the  po- 
litical power  rests  after  the  war  more  largely  in  the  hands  of 
the  masses. 

On  the  other  hand,  there  are  certain  negative  effects  of  the 
war  on  social  insurance.  Owing  to  the  staggering  costs  of  the 
war,  every  nation  has  been  compelled  to  increase  taxes  and  call 
upon  its  citizens  to  loan  their  funds  to  the  government.  This 
has  been  true  not  only  of  belligerents,  but  also  of  many  neutrals, 
and  has  necessitated  the  strictest  economy  by  the  nations,  so 
that  accustomed  expenses  have  been  curtailed.  It  has  been  a 
question  of  finding  new  sources  of  revenue,  reducing  wherever 
possible  expenses  and  postponing  plans  for  additional  outlays. 
Social  insurance  has  thus  suffered,  both,  because  plans  for  its 
extension  have  been  curtailed  in  many  cases,  and  also  because 
there  has  been  an  abandonment  or  modification  of  plans  of  it 
actually  in  practice. 

The  enormous  increase  in  the  cost  of  living  has  affected  sick- 
ness, old  age,  workmen's  compensation,  and  family  allowances. 
The  sums  granted  by  the  original  acts  often  are  pathetically  small 
under  the  prevailing  high  level  of  prices. 

A  discussion  of  the  status  of  social  insurance  under  war  con- 
ditions in  the  leading  nations  will  show  how  it  has  been  affected. 

Social  Insurance  in  the  United  States 

It  has  been  stated  that  in  the  United  States  certain  forms  of 
this  insurance  have  had  little  or  no  development.  This  state- 
ment applies  particularly  to  old  age,  sickness,  and  unemployment 
insurance.  Whatever  of  health  insurance  there  is,  has  been  a 
matter  for  the  individual  to  transact  with  the  ordinary  private 


146  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

companies.  The  same  is  true  of  a  large  amount  of  personal 
accident  insurance,  while  unemployment  and  old  age  insurance 
have  had  no  special  application.  Compensation  insurance  laws 
are  in  force  in  a  large  majority  of  the  states,  all  except  five  of 
them  having  some  form  of  compensation  insurance  for  workmen 
injured  in  the  course  of  their  employment.  Likewise,  the  federal 
government  has  a  similar  law  for  certain  classes  of  federal  gov- 
ernment employes  or  those  engaged  in  interstate  commerce. 
There  has  been  no  disposition  to  abandon  these  plans  of  insur- 
ance, although  the  great  increase  in  the  cost  of  living  makes  the 
awards,  either  granted  by  the  award  boards  or  established  in  the 
law,  of  much  reduced  value  to  the  recipients. 

There  has  been,  however,  a  large  extension  of  the  Activity  of 
the  federal  government  in  providing  allowances  and  other  assist- 
ance to  the  individuals  and  their  dependents  because  of  their 
enrollment  in  the  service  of  the  nation.  In  the  part  of  this  study 
devoted  to  marine  insurance,  the  provision  or  allowance  made 
by  the  federal  governments  to  officers  and  men  of  the  navy 
who  lost  their  lives  or  were  captured  has  been  discussed. 

War  Risk  Social  Insurance 

However,  it  is  in  connection  with  the  second  amendment  to 
the  War  Risk  Insurance  Bureau  Act,  passed  by  Congress 
October  6,  19 17,  that  the  most  important  government  assistance 
is  granted. 

This  comprehensive  act  provides  for  life  insurance,  which 
has  been  previously  described,  for  allotments  and  family  allow- 
ances, and  for  compensation  in  case  of  death  or  disability.  The 
allotment  and  allowance  are  compulsory  as  to  wife,  a  divorced 
wife  who  has  not  remarried  and  to  whom  alimony  has  been 
decreed,  and  to  a  child,  and  voluntary  as  to  any  other  person, 
with  certain  minor  limitations.  The  monthly  compulsory  allot- 
ment has  a  maximum  of  not  more  than  one-half  the  pay,  but 
not  less  than  $15.  Any  additional  sum  from  the  monthly  pay 
may  be  deposited  to  the  credit  of  the  enlisted  man,  who  receives 


EFFECT   ON    SOCIAL   INSURANCE   AND   PENSIONS  I47 

interest  on  it  from  the  government  at  the  rate  of  4  per  cent.  In 
addition,  the  government  may  pay,  upon  proper  application  by 
the  enlisted  man,  to  his  family  or  beneficiary  a  sum  not  to 
exceed  $50  per  month,  the  particular  sum  depending  upon  the 
number  and  degree  of  direct  relationship  of  the  dependents  or 
beneficiaries.  For  this  purpose  of  family  allowances,  two  classes 
are  established:  Class  A  includes  the  wife  and  children,  and 
Class  B  includes  the  parent,  brother,  sister,  and  grandchild. 
Under  certain  limitations,  both  a  divorced  wife  and  an  illegiti- 
mate child  are  included  under  the  provisions  for  the  allowance. 
Dependency  is  the  test  to  be  applied  in  determining  the  right  to 
the  allowance. 

Compensation  is  also  provided  "  for  death  or  disability  result- 
ing from  personal  injury  suffered  or  disease  contracted  in  the 
line  of  duty  by  any  commissioned  officer  or  enlisted  man,  or  by 
any  member  of  the  Army  Nurse  Corps  (female)  or  of  the  Navy 
Nurse  Corps  (female)  when  employed  in  the  active  service." 

If  death  results,  the  compensation  granted  varies  from  $25 
a  month  for  a  widow  to  $47.50  a  month  for  a  widow  and  two 
children,  with  an  additional  $5  a  month  for  each  additional  child 
up  to  two.  If  there  is  no  widow,  but  dependent  children,  the 
compensation  for  one  child  is  $20  a  month,  for  three  children 
$40  a  month,  and  $5  per  month  for  each  additional  child  up  to 
two.  A  compensation  of  $20  a  month  is  established  for  a 
widowed  mother. 

Certain  other  allowances  are  made,  as,  for  example,  $100  for 
burial  expenses  and  the  return  of  the  body  to  the  home.  The 
allowance  to  the  widow  or  widowed  mother  continues  until  remar- 
riage and  to  the  children  up  to  the  age  of  eighteen  years  or  mar- 
riage. The  term  "  widow  "  for  this  purpose  is  defined  as  "  one 
who  shall  have  married  the  deceased  not  later  than  ten  years  after 
the  time  of  injury."  This  limitation  was  imposed  to  guard 
against  an  evil  which  was  present  in  the  pension  systems  of  the 
United  States.  There  have  been  examples  where  old  soldiers, 
receiving  a  pension,  have  been  married  by  those  who  seemed 
to  be  chiefly  interested  in  the  pension. 


148  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

The  compensation  for  disability  includes  total  temporary  dis- 
ability, permanent  disability  and  partial  disability.  The  com- 
pensation provided  depends  upon  the  degree  of  disability  and 
the  number  of  dependents.  For  total  disability,  the  allowance 
is  $30  a  month  when  no  wife  or  child  is  living;  for  a  wife  and 
three  or  more  children  $75  per  month.  If,  in  addition,  the 
recipient  is  in  a  helpless  condition,  an  additional  sum  of  not 
to  exceed  $20  per  month  is  allowed  for  a  nurse  or  an  attendant, 
but  if  the  disability  results  from  the  loss  of  both  feet  or  both 
hands  or  both  eyes,  or  "  for  becoming  totally  blind  or  helpless 
and  permanently  bedridden  from  causes  occurring  in  the  line 
of  duty  in  the  service  of  the  'United  States,"  the  rate  of  com- 
pensation shall  be  $100  per  month.  »^ 

In  case  of  partial  disability,  the  compensation  is  a  percentage 
of  that  which  would  be  payable  for  total  disability,  "  equal  to 
the  degree  of  the  reduction  in  earning  capacity  resulting  from 
the  disability."  This  is  an  adoption  of  the  general  method  of 
awarding  compensation  under  the  compensation  laws  of  most  of 
the  states. 

Still  further,  the  injured  person,  in  addition  to  the  compensa- 
tion, is  furnished  by  the  United  States  with  "  such  reasonable 
governmental  medical,  surgical  and  hospital  services,  and  with 
such  supplies,  including  artificial  limbs,  trusses,  and  similar  appli- 
ances, as  the  director  may  determine  to  be  useful  and  reasonably 
necessary." 

The  more  detailed  provisions  of  this  law  may  be  consulted  in 
the  Appendix.  It  may  appear  unpatriotic  and  critical  to  char- 
acterize these  provisions  together  with  the  insurance  feature 
which  has  been  previously  described  as  "  generous,"  since  the 
risk  or  sacrifice  of  life  for  the  service  of  the  nation  can  not  be 
estimated  in  terms  of  money.  Such  allowances  are  only  generous 
as  compared  with  those  which  are  and  have  been  made  by  other 
nations,  as  well  as  those  which  have  been  made  in  the  past  by 
the  United  States.  This  last  phase  of  the  comparison  brings  up 
the  question  of  the  pension  system  of  the  United  States,  which 


EFFECT   ON   SOCIAL   INSURANCE   AND   PENSIONS  I49 

must  now  be  described  in  order  that  a  comparison  of  the  value  of 
the  two  methods  may  be  made. 


Pension  System  of  the  United  States 

There  are  three  general  types  of  pensions  which  have  been 
provided  by  the  United  States  : 

First,  the  retirement  pension  for  officers  and  men  of  the 
regular  establishment.  This  includes  the  Army,  Navy,  Marine 
Corps,  and  Coast  Guard,  but,  with  the  exception  of  the  last 
named,  no  allowance  is  made  for  an  enlisted  man  unless  he  has 
served  at  least  thirty  years.  But  no  allowance  is  made  for  widows 
and  children  of  either  officers  or  enlisted  men  who  are  killed  in 
the  service,  except  a  death  gratuity. 

Second,  the  general  pensions  for  officers  disabled  in  the 
service  and  not  a  part  of  the  regular  establishment,  and  for 
enlisted  men  disabled  in  the  federal  service,  as  well  as  for  widows, 
children  and  other  dependents  of  officers  and  enlisted  men  who 
have  been  killed  in  the  federal  service. 

Third,  the  service  pensions  provided  by  various  acts  of  Con- 
gress, under  which  veterans  of  wars,  their  widows  and  de- 
pendents have  been  granted  pensions  without  reference  to  a 
disability  incurred  in  the  service,  or  without  reference  to  the 
cause  of  death.  That  is,  they  are  pensions  for  service  to  the 
nation.  Under  the  first  class,  the  retirement  allowance  has  been 
three-fourths  of  the  active  pay.  If  the  retirement  was  made  on 
account  of  disability,  the  pension  took  no  cognizance  of  this 
important  fact,  but  was  based  on  the  pay  received.  Nor  was 
the  death  gratuity  to  the  widow  or  other  beneficiary  granted 
unless  the  officer  or  enlisted  man  was  in  active  service. 

In  a  recent  study  which  has  been  made  of  the  general  and 
service  pension  laws  the  author  describes  them  as  follows :  ^ 

*  Governmental  Provisions  in  the  United  States  and  Foreign  Countries  for 
Members  of  the  Military  Forces  and  Their  Dependents,  Capt.  S.  Herbert 
Wolfe,  U.  S.  Department  of  Labor,  Miscellaneous  Series,  No.  11. 


150  EFFECTS    OF   THE   WAR   UPON   INSURANCE 

Service  Pensions 

The  principle  that  some  compensation  was  due  from  the  government  for 
disability  or  death  had  been  established  by  legislation  long  before  the  out- 
break of  the  Civil  War.  In  general,  in  i860,  the  man  totally  disabled  in 
service  and  the  widow  and  children  of  the  man  dying  as  a  result  of  service 
were  entitled  for  life  to  one-half  of  the  pay  the  man  was  receiving  at  the 
time  of  his  injury  or  death;  the  minimum  rate  for  total  disabihty  was  fixed 
at  $8  a  month  and  the  maximum  rate  for  disabled  men  and  for  widows  was 
half  the  pay  of  the  lieutenant  colonel.  The  man  who  was  slightly  disabled 
received  a  pension  at  a  lower  rate  according  to  the  extent  of  his  disabihty. 

In  1862  the  minimum  for  a  widow  was  raised  to  $8  and  the  maximum  for 
a  widow  or  a  totally  disabled  man  was  reduced  to  $30  monthly.  Four  years 
later  a  supplementary  allowance  of.  $2  monthly  was  granted  to  the  widow 
for  each  child  under  sixteen  years  of  age.  The  widow's  scale  was  again 
amended  in  1886  by  raising  the  minimum  to  $12  monthly.  For  the  disabled 
man  a  pension  based  not  on  the  pay  of  his  rank  but  on  the  nature  of  his 
disability  was  first  provided  in  1864,  when  he  was  allowed  $25  monthly  for 
the  loss  of  both  hands  or  the  sight  of  both  eyes,  and  $20  monthly  for  the 
loss  of  both  feet.  The  list  of  disabilities  for  which  pension  rates  were 
specified  was  soon  extended  and  practically  reached  its  present  form  in  1872. 
The  rates  have  been  greatly  increased,  however,  since  that  time. 

During  the  fiscal  year  ended  June  30,  i860,  there  were  on  the  pension  roll 
11,284  persons  and  the  expenditure  for  pensions  was  a  little  over  a  million 
dollars.  In  1865,  the  number  of  pensioners  under  the  general  law  had 
jumped  to  85,986  and  the  annual  expenditure  to  $8,500,000.  The  number  of 
persons  receiving  pensions  because  of  disability  or  death  in  the  service 
reached  its  maximum  in  1891,  with  530,174  persons  on  the  rolls  and  an  annual 
expenditure  of  over  $104,000,000.  Since  that  time  the  decrease  in  number  of 
pensioners  and  in  annual  disbursements  for  disability  or  death  in  the  service 
has  been  continuous,  although  during  the  year  ended  June  30,  1916,  there 
were  still  more  than  140,000  persons  on  this  roll  and  the  disbursements 
amounted  to  $30,700,000.  The  total  expenditure  for  these  pensions  from  i860 
to  1916  has  amounted  to  almost  two  and  three-fourths  billion  dollars 
($2,735,635,725.89).  The  disbursements  to  disabled  survivors  have  been  more 
than  double  those  to  widows  and  other  dependents,  70  per  cent  of  the  total 
amount  having  been  paid  to  survivors  and  30  per  cent  to  widows  and  others. 
It  is  only  since  1878,  however,  that  the  annual  disbursements  to  disabled 
survivors  have  been  greater  than  those  to  the  dependents  of  men  killed  in 
the  service.  Year  by  year  from  1864  to  1874,  inclusive,  the  number  of  depend- 
ents on  the  roll  was  greater  than  the  number  of  disabled  survivors.  And 
from  i860  to  1877,  inclusive,  the  annual  disbursements  to  dependents  were 
greater  than  those  to  survivors. 

Service  pensions  had  been  granted  before  i860  to  men  who  had  served  at 
least  six  months  or  until  the  close  of  the  Revolutionary  War  and  to  their 
widows  and  children.  In  1862  a  law  was  passed  practically  excluding  new 
claims  for  pensions  under  these  old  laws. 


EFFECT   ON   SOCIAL   INSURANCE   AND    PENSIONS  I5I 

The  first  pension  for  service  in  any  other  war,  granted  without  reference 
to  disability  or  death  incurred  in  the  service,  was  granted  in  1871.  This 
applied  only  to  the  War  of  1812.  The  first  Mexican  War  service  pension 
was  enacted  in  1887  and  the  first  Civil  War  service  pension  in  1890. 

Since  1890  the  monthly  rates  for  service  pensions  have  been  repeatedly 
raised.  They  are  not,  however,  uniform  for  the  various  wars.  For  example, 
pensions  to  Civil  War  veterans  under  the  most  recent  act  affecting  them 
(May  II,  1912)  range  from  $13  to  $30,  according  to  age  and  length  of 
service.  Pensions  to  men  who  participated  in  the  Indian  wars  are  fixed 
at  $20  monthly.  Pensions  to  widows  without  children  under  sixteen  years 
of  age  range  from  $12  to  $20  monthly.  Children  under  sixteen  years  of  age 
of  men  who  served  at  least  ninety  days  in  the  Civil  War  are  eligible  to  pen- 
sion, but  no  children  are  provided  for  under  service  acts  relating  to  other 
wars.  The  rate  for  each  child  of  a  pensioned  mother  is  $2  monthly;  a  family 
of  motherless  children  receives  $12  monthly  plus  the  $2  extra  for  each  indi- 
vidual child.  As  with  pensions  under  the  general  law,  a  "  helpless "  child 
over  sixteen  is  pensionable  provided  he  was  under  sixteen  years  of  age  at 
the  time  of  his  father's  death.  Dependents  other  than  widow  and  children 
are  not  eligible  to  service  pensions. 

Not  only  have  the  rates  of  the  Civil  War  service  pensions  been  raised  since 
1890,  but  the  limitations  concerning  disability  or  dependency  have  been 
relaxed.  At  first  a  man  was  eligible  to  a  pension  only  if  he  were  incapaci- 
tated for  manual  labor,  although  his  disability  need  bear  no  relation  what- 
ever to  his  Civil  War  service,  and  a  widow  must  have  been  without  means 
of  support  other  than  her  own  daily  labor.  Now,  however,  age  without 
disability  entitles  a  man  to  a  Civil  War  service  pension,  and  any  widow  who 
was  married  before  June  27,  1905,  to  a  man  who  had  served  ninety  days  in 
the  Civil  War  is  entitled  to  a  pension  without  regard  to  dependency. 

The  service  pensions  for  the  War  of  1812  and  the  Mexican  War  had  little 
effect  upon  either  the  amounts  paid  to  pensioners  or  the  number  of  bene- 
ficiaries. The  Civil  War  service  pension  act  (1890),  on  the  other  hand, 
raised  the  total  number  of  pensioners  under  all  laws  from  approximately 
450,000  in  1890  to  965,000  in  1893. 

The  rates  for  the  service  pension  at  that  time  ranged  from  $6  to  $12  and 
were  higher  than  those  awarded  for  very  minor  disabilities  under  the  gen- 
eral law.  It  would  appear  that  many  pensioners  may  have  applied  for 
transfer  to  the  service  pension  poll,  since  the  total  number  of  pensioners 
under  all  laws  continued  to  increase  until  1902,  although  the  number  of  pen- 
sioners under  the  general  law  declined  steadily  and  rapidly  after  1891,  and 
this  rapid  decline  could  hardly  be  accounted  for  by  the  number  of  deaths 
occurring  among  the  pensioners.  Furthermore,  the  total  number  of  pen- 
sioners, after  remaining  fairly  constant  for  three  years  after  1902,  began  to 
decrease  rapidly  after  1905,  while  the  decrease  in  the  number  of  service  pen- 
sioners did  not  begin  until  four  years  later  and  was  checked  temporarily 
by  the  passing  of  a  new  law  in  1912. 

The  difference  between  the  maximum  number  of  pensioners  under  the  gen- 
eral law  and  the  maximum  number  under  the  service  acts  is  noteworthy: 


152  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

530,000  persons  received  pensions  in  1891  for  death  or  disability  incurred  in 
the  service ;  693,000  persons  received  pensions  in  1909  for  service  without 
regard  to  cause  of  death  or  disability. 

The  effect  of  the  service  pension  legislation  upon  pension  expenditure  has 
been  striking.  The  total  amount  paid  in  pensions  from  i860  to  1916  is  nearly 
five  billion  dollars  ($4,946,792,242.90),  and  more  than  two-fifths  of  this 
amount,  44.7  per  cent  ($2,211,156,517.01),  has  been  paid  for  service  pensions. 
The  largest  annual  expenditure  for  pensions  under  the  general  law  was  the 
$104,500,000  paid  to  530,000  persons  in  1891.  The  largest  annual  expenditure 
for  service  pensions  was  the  $136,800,000  paid  to  627,000  persons  in  1914. 

In  this  connection  the  total  number  of  soldiers  and  sailors  engaged  in  all 
the  previous  wars  of  the  United  States  is  of  interest: 

Revolutionary  War  184,038 

War  of  1812  286,730 

Mexican  War   78,718 

Indian   wars    83,993 

Civil    War    2,213,365 

Spanish    War    ^312,000 

Philippines  and  China  146,151 

Total    3,304,995 

Payments  under  the  service  acts  were  negligible  until  after  the  passing  of 
the  first  Civil  War  service  act,  when  they  increased  from  $1,766,874  in  1890 
to  $56,133,570  in  1893.  When  the  service  pensions  were  increased  for  the 
older  pensioners  in  1907,  the  number  of  pensioned  survivors  rose  slightly 
and  the  annual  expenditure,  to  survivors  only,  rose  from  $57,000,000  in  1907 
to  $76,500,000  in  1908.  Again,  in  1912,  the  rate  was  increased  and  annual 
expenditure  to  survivors  rose  from  $69,500,000  in  1912  to  $94,500,000  in  1913. 

In  the  same  way  the  number  of  widows  on  the  service  pension  roll  increased 
a  little  more  rapidly  after  the  change  in  the  widows'  law  in  1908  and  the 
annual  expenditure  for  service  pensions  to  widows  rose  from  $21,000,000  in 
1908  to  $32,750,000  in  1909. 

The  total  expenditure  for  pensions  has  been  so  great  that  the  millions  of 
dollars  appropriated  by  special  acts  on  behalf  of  individuals  are  a  small  per- 
centage of  the  total.  An  analysis  of  the  annual  reports  of  the  Commissioner 
of  Pensions  shows  that  from  1861  to  1901,  inclusive,  the  number  of  new 
pensioners  added  year  by  year  plus  the  number  of  pensioners  receiving  an 
increased  amount  was  2,837,455  under  the  public  acts  and  8,172  under  the 
special  acts.  Since  1901,  however,  there  has  been  a  marked  increase  in  the 
amount  of  special  pension  legislation,  so  that  the  total  number  of  persons 
affected  by  special  acts  from  1861  to  1915,  inclusive,  had  risen  to  45,217. 
Most  of  the  special  legislation  is  concerned  with  granting  a  special  rate  to 
pensioners  already  on  the  rolls  under  the  public  laws.  Since  1901,  for 
example,  seven-eighths  of  the  special  acts  have  granted  increased  and  only 
one-eighth  have  added  new  pensioners  to  the  roll. 

The  part  played  by  pensioners  under  special  acts  during  the  last  six  years 
appears  more  clearly  from  the  following  comparison  compiled  from  the 
annual  reports  of  the  Commissioner  of  Pensions: 


Year 

Number 

Ended 

of  Pen- 

June 30 

sioners 

I9II 

869.775 

I9I2 

838,210 

1913.... 

798,184 

1914- ••• 

765,559 

1915- •■• 

726.499 

1916 

688,913 

EFFECT   ON   SOCIAL   INSURANCE   AND    PENSIONS  1 53 

Pensions  under  Public  and  Special  Laws,  191  i  to  1916 

Pensions  under  Public  Laws  Pensions  under  Special  Laws 

Annual    Value    of  Number  Annual    Value   of 

Premium*  of  Pen-  Premiums 

Total  Average  sioners  Total  Average 

$148,222,880.80  $170.40  22,323  $6,611,357  $296.17 

144,973,569.40      172.96  22,084  6,584,572  298.12 

164,791,688.82     206.46  22,0X6  6,699,096  304.28 

160,504,849.26     209.66  19,680  5,944,484  302.05 

154,531,719.78     212.71  21,648  6,640,722  306.76 

147,473,711-26     214.07  20,659  6,235,218  301.82 

In  the  European  nations  the  granting  of  separation  allowances 
is  the  rule,  either  upon  the  enlistment  of  the  man  or,  in  case  of 
need,  on  the  part  of  his  dependents.  Since  the  beginning  of 
the  war,  the  European  nations  have  greatly  extended  these  allow- 
ances to  dependents. 

The  table  on  pages  154  and  155  shows  the  important  statistics 
in  reference  to  the  operation  of  the  pension  system  of  the  United 
States. 

Evils  of  the  Pension  System 

The  evils  of  the  pension  system  in  the  United  States  are  too 
well  known  to  need  a  detailed  discussion.  In  its  actual  operation 
the  intended  recipient  has  been  benefited  but  little  or  not  at  all 
in  many  cases.  Pensions  have  not  infrequently  been  used  to 
further  political  party  ends.  Considerations  of  fairness  and 
equity  as  between  individual  pensioners  have  been  so  often  dis- 
regarded that  the  whole  pension  system  in  the  United  States 
became  a  reproach  to  the  representative  form  of  government. 
The  generosity  of  a  grateful  people  to  those  who  gave  their 
lives  and  services  to  the  perpetuation  of  the  republic  was  prosti- 
tuted by  selfish  considerations. 

The  contrast  between  the  old  system  of  pensions  and  that 
provided  by  the  war  risk  insurance  acts  of  19 17  is  most  striking. 
The  feature  of  compensation,  so  far  as  such  an  end  is  possible, 
is  made  the  basis  of  the  new  laws.  Life  insurance,  disability 
insurance,  dependent  allowances  cover  the  contingencies  of 
death,  of  support  if  disabled,  and,  last,  but  not  least,  the  family, 
or  the  dependents,  are  provided  for  during  his  period  of  service 


Disability  and  Service  Pensions  (Excluding  Treasury  Settlements)  '  Paid  to  Survivors 
AND  TO  Dependents — Number  of  Pensioners  and  Annual  Disbursements,  1860-1916 

[Data  from  annual  reports  of  U.   S.  Commissioner  of  Pensions  and  data  in  office  of  Auditor  of  the 
Department  of  the  InteriorJ 


Grand  Total 

Pensions  for  Disability 

Fiscal 
Year 

Total 

Survivors 

Widows  and  Other 
Dependents 

Ended 

Num- 
ber of 

Amount 

June  30 

Pen- 

Paid 

Num- 

sioners 

ber  of 

Amount 

Num- 

Amount 

Num- 

Amount 

Pen- 

Paid 

ber 

Paid 

ber 

Paid 

sioners 

Total 

'$4,946,792,242.90 

$2,735,635,725.89 

$1,916,325,408.16 

$819,310,317.73 

i860... 

11,284 

1,103,562.03 

11,284 

1,103,562.03 

5.358 

467,810.93 

5,926 

635,751.10 

1861... 

10,709 

1,073,061.55 

10,709 

1,073.061.55 

5.215 

469,549.39 

5,494 

603,512.16 

1862... 

8,159 

790,384.76 

8,159 

790,384.76 

4.341 

361,549.75 

3,818 

428,835.01 

1863... 

14.791 

1,029,143.08 

14.791 

1,029,143.08 

7.821 

437,725.97 

6,970 

591,417-11 

1864... 

51.13s 

4,504,616.52 

51,135 

4,504,616.52 

23.479 

1,440,975.27 

27,(il(> 

3,063,641.25 

186s... 

85.986 

8,525.153,11 

85,986 

8,525.153.11 

35.880 

2,206,342.06 

50.106 

6,318,811.05 

1866.,. 

126,722 

13.459.996.43 

126,722 

13,459,996.43 

55.652 

3,872,161.90 

71,070 

9,587,834-53 

1867... 

155.474 

18,619,956.46 

155,474 

18,619,956.46 

71.856 

6,505.773.83 

83.618 

12,114,182.63 

1868... 

169,643 

24,010,981.99 

169,643 

24,010,981.99 

75.957 

7,582,156.85 

93.686 

16,428,825.14 

1869... 

187.963 

28,422,884.08 

187.963 

28,422,884.08 

82,8i;9 

9,509,354.99 

105,104 

18,913,529.09 

1870... 

198,686 

27,780,805.81 

198,686 

27,780,805.81 

87,521 

9,137,362.43 

111,165 

18,643,443.38 

1871... 

207.49S 

33.077.383.63 

206,768 

33,074,317.58 

92.667 

12,494,565.73 

lj4,ioi 

20,579.751-85 

1872..; 

232,229 

30,169,341.00 

212,102 

27,855,931.53 

96,854 

10,294,588.34 

115.248 

17,561,343-19 

1873... 

238,411 

29,185,289.52 

215,092 

26,417,378.95 

101,234 

10,725,797.49 

113.858 

15.691.581,46 

1874..- 

236,241 

30,593.749.56 

213,309 

28,388,900.21 

104,008 

11,027,553.22 

109,301 

17.361,346.99 

187s... 

234,821 

29,683,116.63 

213,783 

27,794.516.56 

107,114 

11,934,109.61 

106,669 

15,860,406.95 

1876... 

232,137 

28,351,599.69 

212,944 

26,816,789.56 

110,033 

12,046,820.65 

102,911 

14,769,968.91 

1877... 

232,104 

28,122,683.48 

214,693 

26,826,476.7s 

115,921 

13,155.163.55 

98,772 

13,671,313-20 

1878... 

223,998 

26,530,792.10 

209,866 

25.467.301.58 

121,242 

13.271,339.48 

88,624 

12,195,962.10 

1879... 

242.755 

29,642,430.13 

209,940 

26,435,204.93 

126,994 

14,982,867.79 

82,946 

11,452,337-14 

1880... 

250,802 

37,046,185.89 

215,914 

33.597.417.36 

135.272 

20,876,940.64 

80,642 

12,720,476.72 

1881... 

268,830 

49,723,147.52 

233,903 

46,719,733.77 

155,212 

34,531,541.57 

78,691 

12,188,192.20 

1882... 

285,697 

53.924.566.20 

253.902 

51,422,083.72 

175,499 

39,218,215.71 

78,403 

12,203,868.01 

1883... 

303.658 

60,064,009.23 

277.391 

57,824,132.01 

201,11  I 

44,807,719.81 

76,280 

13,016,412.20 

J884... 

322,756 

56,908,597.60 

299,346 

54,943,406.66 

221,572 

41,416,331.08 

77,774 

13.527.075-58 

1885... 

345.125 

64.933.288.12 

324,968 

63,207,000.59 

244,201 

47,845,006.93 

80,767 

15.361,993-66 

1886... 

365.783 

*    63,758,645.65 

350,847 

62,155,359.62 

268,807 

46,285,072.17 

82,040 

15.870,287-45 

1887. .. 

406,007 

*    73.447.639.92 

384,709 

71,520,613.79 

297,726 

50,179,146.66 

86,983 

21,341,467.13 

1888. .. 

452,557 

0     78,756,847.44 

419,800 

74,641,770.65 

326,83s 

53.970,451.09 

92,965 

20,671,319.56 

1889... 

489,72s 

•   88,260,597.56 

455,887 

84,319,883.45 

356.031 

57.338,580.29 

99.856 

26,981,303.16 

1890. . . 

537.944 

'  105,511,959.75 

504,999 

101,786,790.85 

398,083 

75.252,712.06 

106,916 

26,534.078.79 

1891.., 

676,160 

'  116,859,703.41 

530,174 

104,571,848.32 

419,046 

76,255,717.23 

111,128 

28,316,131.09 

1892... 

876,068 

'  139.035.612.68 

506,074 

84,676,660.15 

394,794 

63,154,515.76 

111,280 

21,522,144.39 

1893... 

966,012 

156,641,098.9s 

475,662 

85,274.588.13 

365,440 

63,413,495.42 

110,222 

21,861,092.71 

1894... 

969.544 

139.774,654.83 

467,759 

78.131.599.97 

362,274 

59,522,220.14 

105.48s 

18,609,379.83 

i895--- 

970,524 

139,749.245,80 

459,886 

77,008,933.05 

357,223 

59,382,212.01 

102,663 

17,626,721.04 

1896... 

970,678 

138,049,540.41 

449,144 

76,188,312.26 

349,624 

58,960,629.15 

99.520 

17.227,683.11 

1897... 

976,014 

139.799.242.12 

438,080 

74,865,082.92 

341,087 

57,955,504-18 

96.993 

16.909.578-74 

1898... 

993.714 

144,547,962.63 

426,770 

75.168,753.73 

331,913 

58,398,678.25 

94.857 

16,770,075.48 

1899... 

991.519 

138,253,922.91 

414,755 

71,044,760.70 

321,678 

56,032,005.41 

93.077 

15.012,755-29 

1900. .. 

993.529 

138,338,469.87 

403,145 

60.880,938.71 

311,484 

55,240,323-69 

91,661 

14,649,615-02 

1901... 

997,735 

138,405,159.74 

392,090 

68,945,322.00 

301,230 

53,983,513-99 

90,860 

14,961,808.01 

1902... 

999.446 

137.400,742.17 

381,107 

67,134,115.52 

288.936 

52,523.235-91 

92,171 

14,610,879.61 

1903... 

996,54s 

137,646,132.41 

370,235 

66,554,973.41 

277,481 

51,482,730.59 

92,754 

15,072,242.82 

1904... 

994,762 

140,979.469.72 

355,720 

66,895,701.23 

262,726 

51,559,497-80 

92,994 

IS. 336,203.43 

1905-.. 

998,441 

141,036,612.50 

337.790 

64,854,154,54 

245,125 

49,808,945.84 

92,665 

15.045,208.70 

1906. .. 

985,971 

138,864,409.45 

326,964 

62,667,691.90 

233.669 

47,905,172.75 

93,295 

14,762,519.15 

1907... 

967,371 

138,030,894.22 

299.97'? 

60,627,001.30 

208,923 

46,258.604.88 

91,056 

14,368,396.42 

1908. .. 

951,687 

152,959.537.96 

264,387 

55,316,539-33 

174,378 

41,354,275.67 

90,009 

13,962,263.66 

1909... 

946,104 

161,883,599.35 

252,594 

53.604,939.20 

165.458 

39.710.576.23 

87,136 

13,894.362.97 

1910. .. 

921,083 

159,972,015.18 

241,316 

51,466,014.35 

157.544 

38,109,158.38 

83,772 

13,356.855.97 

1911 . . . 

892,098 

157,323.102.73 

230.399 

50,081,337.18 

150,203 

37.278,386.73 

80,196 

12.802.950.45 

1912... 

860,294 

152,986,105.22 

217,747 

47,723,111.25 

141,451 

35,500,429.21 

76,296 

12,222,682.04 

I9I3--. 

820,200 

174,160,717.8s 

172,289 

43,310,748.77 

100,518 

31,575,761.79 

71,771 

11,734,986.98 

l9i4--< 

785,239 

172,408,518.29 

157,466 

35.515.542.21 

89,516 

24,428.518.86 

67,950 

11,087,023.35 

I9IS--. 

748,147 

165,518,266.14 

149,998 

32,873,864.34 

84,948 

22.258.063. 99 

65,050 

10.615,800.3s 

1916. . . 

709.572 

159,155.089.02 

140.384 

30,708,635.48 

79,247 

20,627,947.06 

61.137 

10,080,688.42 

*  Payments  by  Treasury   Department   to   beneficiaries   whose   pensions   had    reverted   to   the   Treasury   be- 
cause they  could  not  be  located  when  pensions  were  due. 

^  Exclusive  of  arrears,  total,  $120,144.53.  •  Exclusive  of  arrears  of  $14,515.72. 

*  Exclusive  of  arrears  of  $39,189.56.  ''  Exclusive  of  arrears  of  $16,220.63. 

*  Exclusive  of   arrears  of   $19,941.95.  '  Exclusive  of  arrears  of  $13,076.27. 

*  Exclusive  of  arrears  of  $11,598.40.  '  Exclusive  of  arrears  of  $5,602.06. 


EFFECT  ON  SOCIAL  INSURANCE  AND  PENSIONS 


155 


Disability  and  Service  Pensions  (Excluding  Treasury  Settlements)  '  Paid  to  Survivors 
AND  to  Dependents — Number  of  Pensioners  and  Annual  Disbursements,  1860-1916,  Cont. 


Pensions  for  Service 

Fiscal 
Year 

Total 

Survivors 

Widows  and  Other 
Dependents 

Nurses 

Ended 

June  30 

Num- 

ber of 

Amount 

Num- 

Amount 

Num- 

Amount 

Num- 

Amount 

Pen- 

Paid 

ber 

Paid 

ber 

Paid 

ber 

Paid 

sioners 

Total 
i860. . . 

$2,211,156,517.01 

$1,604,651,773.16 

$604,711,615.55 

$1,793,128.30 

1861... 
1862... 
J863... 

. . '.  '. . . 

1864... 

1865... 

1866... 

1867... 

1868... 

1869... 

1870... 

1871... 

727 

20,127 
23.319 
22,932 
21,038 
19.193 
17,411 
14.132 

3,066.0s 
2,313.409-47 
2,767,910.57 
2,204,849.35 
1,888,600.07 
1.534.810.13 
1,296,206.73 
1,063,490.52 

727 
17,100 
18,266 
17,620 
15,875 
14,206 
12,802 
10,407 

2.555-05 
1.977.415-84 
2,078,606.98 
1,588,832.9s 
1.355.599-86 
1,089,037.18 
934.657-82 
768,918.47 

3,027 
5.053 
5.312 
5. 163 
4.987 
4.609 
3.725 

511.00 
335.993-63 
689,303-59 
616,016.40 
533,000.21 
445.772.95 
361,548.91 
294,572.05 

1872.,. 

1873... 

1874... 

1875... 

1876... 

1877... 

1878... 

1879... 

32,81s 
34.888 
34.927 
31,795 
26,267 
23.410 
20.IS7 

3,207,225.20 
3,448,768.53 
3.003,413.7s 
2,502,482.48 
2,239,877.22 
1,965,190.94 
1,726,287.53 

1,603,286.03 

11,621 
10,138 
8,898 
7,134 
4,931 
3.898 
2.945 

1,014,525.66 
790,710.39 
621,6:2.80 
478,274.85 
357.334.81 
278,888.85 
208,021.20 

21,194 
24.750 
26,029 
24,661 
21,336 
19.S12 
17,212 

2,192,699.54 
2,658,058.14 
2,38:,8oo.95 
2,024,207.63 
1,882,542.4: 
:, 686, 302. 09 
1,518,266.33 

1880.., 

1881... 

1882... 

1883... 

1884... 

1885... 

1886... 

14.936 

1.539 

144,389.59 

13.397 

1,458,896.44 

1887... 
1888... 

21,298 

1,927,026.13 
4,115,076.79 

8,572 

158,985.69 

12,726 
15,891 

1,768,040.44 
2,179,661.24 

32,757 

16,866 

1.935.415-55 

1889... 
1890. ,. 
1891... 

33.838 

3,940,714.11 
3,725,168.90 
12,287,855.09 

17,668 

16,170 
15.374 
28,211 

2,091,0:4.54 
1,958,294.27 
2, 83:, 128. OS 

32.94s 

17.571 

1,766,874.63 
9,456,727.04 

145,986 

117.77s 

1892. .. 

369,994 

54.358,952-53 
71,366,510.82 

308,448 

45,282,238.13 

61,546 
96,084 

9,076,714.40 

1893... 

490,350 

393.982 

56,133.573-07 

15,214,594.80 

284 

18,342.9s 

1894... 

501,785 

61,643,054.86 

391,694 

46,834,053.62 

109,677 

14.743.318.38 

414 

65,682.86 

1895... 

510,638 

62,740,312.75 

393,734 

48,223,866.77 

116,405 

14,437.225.72 

499 

79,220.26 

1896... 

521,534 

61,861,228.1s 

398,350 

46,897,099.22 

122,644 

14,879,930.2: 

540 

84,189,7a 

1897... 

537.934 

64,934.159.20 

405,742 

48,022,331.04 

131,529 

16,821,548.49 

663 

90,279,67 

1898... 

566,944 

69,379,208.90 

425,943 

51.351.502.80 

140,346 

17, 92:, 076. 71 

655 

106,629.39 

1899... 

576,764 

67,209,162.21 

431-773 

50,318,247.18 

144.338 

16,791,365.36 

6S3 

99.549-67 

1900. .. 

590,384 

68,448,531.16 

440,380 

51,580,866.13 

149,358 

16, 767, 2::. 83 

646 

100,453.20 

1901. .. 

605,645 

69.459,837.74 

446,769 

51,842,196.27 

158,226 

17.520,503.87 

650 

97,137.60 

1902. .. 

618,339 

70,266,626.65 

449,873 

51,764,799-99 

167,832 

18,408,464.19 

634 

93.362.47 

1903... 

626,310 

71,091,159.00 

451.251 

51,962,961.72 

174,435 

19,038,470.48 

624 

89,726.80 

1904... 

639,042 

74.083,768.49 

457,589 

54,182,693.30 

180,847 

19,806,421.32 

606 

94.653-87 

1905- •• 

660,65: 

76,182,457.96 

472.033 

56,020,130.76 

188,015 

20,068,151.87 

603 

94.175-33 

1906. .. 

659,007 

76,196,717-55 

467.235 

56,306,958.24 

191,193 

19,803,654.65 

579 

86,104.06 

1907... 

667,392 

77.403.892.92 

471.014 

57,171,569.10 

195,836 

20,149,958.89 

542 

82,364.93 

1908. . . 

687,300 

97.642,998.63 

483.693 

76,566,198.47 

203,097 

21,000,148.09 

510 

76,652.07 

1909... 

693,600 

108,278,660.15 

467,099 

75,478,824.04 

226,023 

32,728,207.:! 

478 

71,629.00 

1910. .. 

679,767 

108,506,000.83 

444.636 

74,187,856.02 

234,689 

34,251,140.88 

442 

67.003.93 

1911 . . . 

661,699 

107,241,765.55 

410,847 

72,125,959.35 

241,446 

35,053.949-27 

406 

61,856.93 

1912. . . 

642,547 

105,262,993-97 

396,549 

69,575,638.55 

245,636 

35,631,927.59 

362 

55,427.83 

I9I3-' 

647.911 

130,849,969.08 

402,787 

94,686,149.48 

244,796 

36,:i3,262.97 

328 

50,556.63 

1914.  .. 

627,773 

136,892,976.08 

380,815 

100,600,119.10 

246,666 

36,247,268.58 

292 

45.S88.40 
42,602.93 

1915... 

598,149 

132,644,401.80 

352,500 

96,484,903.58 

245,374 

36,116,895.29 

275 

1916. .. 

569.188 

128,446,454.44 

323.873 

92.193,952.4s 

245,063 

36,212,564.79 

252 

39,937.20 

*  Payments  by  Treasury   Department  to   beneficiaries   whose  pensions  had   reverted  to   the   Treasury   he- 
cause  they  could  not  be  located  when  pensions  were  due. 


156  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

as  well  as  after  his  return,  if  he  does  not  return  in  a  physical 
or  mental  condition  which  makes  possible  his  support  of  these 
dependents.  The  new  system  is  so  infinitely  superior  to  the 
old,  that  no  political  party  or  self-seeking  politician  should  ever 
dare  to  attempt  to  resurrect  the  old,  unjust  system. 

It  is  not  probable  that  the  war  will  delay  for  any  long  period 
the  development  of  social  insurance  in  the  United  States.  The 
principle  of  workmen's  compensation  has  received  a  general 
acceptance,  and  the  few  states  which  do  not  have  such  a  law  will 
doubtless  enact  one  in  the  near  future.  Just  before  the  war  there 
was  beginning  to  be  manifested  considerable  interest  in  health 
or  sickness  insurance,  and  organizations  were  formed  to  agitate 
the  question.  In  some  cases  committees  had  been  appoi«ted,  some 
official  and  others  unofficial,  to  investigate  the  whole  question  of 
sickness  insurance  with  particular  reference  to  its  adoption  in 
this  country.  Some  interest  and  agitation  were  present  also  on 
the  subject  of  unemployment  insurance,  old  age  pensions  and 
invalidity  insurance.  The  war  has  absorbed  interest  in  its  prob- 
lems, but,  considering  the  relative  backwardness  of  the  United 
States  in  these  forms  of  social  insurance,  and  considering  further 
some  of  the  conditions  which  will  probably  prevail  after  the 
war,  it  would  seem  safe  to  predict  that  social  insurance  will 
have  a  considerable  development  in  the  United  States  in  the  near 
future,  and  that  part  of  this  development  will  be  caused  directly 
or  indirectly  by  the  war. 

As  the  people  come  to  understand  better  the  insurance  prin- 
ciple and  to  realize  its  enormous  social  advantages,  they  will 
insist  that  increased  use  of  it  as  a  social  agency  be  made,  although 
this  need  not  prohibit  its  use  for  purely  private  or  business  ends. 

An  examination  may  now  be  made  of  the  effect  of  the  war 
on  social  insurance  in  the  leading  nations,  including  the  new 
provisions  for  the  protection  of  the  dependents  of  those  engaged 
in  the  war. 


effect  on  social  insurance  and  pensions         1 57 

Social  Insurance  and  Pensions  in  Canada 

The  prewar  conditions  in  Canada  were  somewhat  similar  to 
those  in  the  United  States  as  regards  social  insurance.  Canada 
has  had  no  such  pension  experience  as  the  United  States  has 
had,  but,  on  the  other  hand,  the  various  forms  of  social  insur- 
ance, as  in  the  States,  had  had  no  considerable  development. 
With  the  entrance  of  Canada  into  the  war  new  problems  arose 
in  connection  with  the  large  number  of  its  population  dependent 
upon  those  called  into  service.  Provisions  for  these  classes  have 
been  made  under  two  general  forms:  (a)  certain  benefits  payable 
while  in  the  service,  and  (b)  other  benefits  payable  after 
discharge. 

Under  the  first  arrangement  come  the  provisions  of  law  by 
which  the  enlisted  man  is  required  to  assign  at  least  one-half 
his  pay,  and  not  more  than  twenty  days'  pay  in  each  month. 
In  addition,  the  Canadian  government  grants  an  allowance  to 
the  families  of  officers  and  privates,  varying  according  to  rank, 
rather  than  according  to  the  size  of  the  family. 

In  addition  to  these  two  classes  of  benefits,  certain  municipali- 
ties of  Canada  have  insured  in  private  life  insurance  companies 
the  lives  of  their  citizens  for  the  benefit  of  their  dependents. 
In  the  city  of  Toronto  a  large  part  of  this  insurance  is  provided 
by  the  city  itself,  instead  of  by  the  private  insurance  company. 

Supplementing  these  benefits  is  the  Canadian  Patriotic  Fund. 
This  fund  is  made  up  from  voluntary  contributions,  from  grants 
by  some  of  the  provinces,  and  from  grants  by  minor  political 
divisions.  The  fund  is  managed  by  private  individuals  and 
exists  for  the  purpose  of  aiding  the  families  of  those  engaged 
in  the  military  or  naval  service.  The  benefits  payable  after  dis- 
charge are  either  pensions  or  sums  payable  during  reeducation. 
The  yearly  pension  varies  from  $480  for  the  rank  and  file  to 
$2,700  for  a  brigadier  general.  The  pension  covers  both  death 
and  disability,  the  amount  paid  in  case  of  disability  being  ad- 
justed to  the  degree  of  disablement.  Six  classes  are  established 
for  those  entitled  to  pensions.     Class  I,  for  example,  includes 


158  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

those  of  100  per  cent  of  disability  and  Class  VI  includes  those 
with  less  than  20  per  cent  of  disability.  Other  allowances  are 
made  for  each  child  and  for  an  attendant  in  case  of  helplessness. 
There  has  been  considerable  objection  to  the  plan  on  account 
of  its  low  scale,  and  it  is  probable  that  with  the  continuation  of 
the  war,  or  after  its  close,  adjustments  will  be  made.^ 


Social  Insurance  in  England 

It  is  difficult  to  describe  in  brief  space  the  social  insurance 
system  of  England  and  the  effect  of  the  war  on  it,  .for  the 
English  system,  like  that  of  Germany,  is  very  comprehensive. 
The  National  Insurance  Act  of  England  with  its  amehdments 
supplied  an  extensive  system  of  social  insurance.  Health  insur- 
ance, unemployment,  and  old  age  pensions  had  been  provided  in 
England,  and  the  whole  system  of  social  insurance  had  hardly 
passed  through  the  initial  stages  of  application  when  the  war 
began.  Adjustments  had  been  made  from  time  to  time  to  im- 
prove the  system,  and  the  unusual  situation  brought  about  by 
the  war  produced  new  conditions.  Drastic  changes  in  the  Na- 
tional Insurance  Act  became  necessary.  Large  numbers  of 
women  became  industrial  workers.  Still  larger  numbers  of  male 
employes  left  the  service  of  their  regular  employers  to  enter 
the  service  of  the  nation.  The  regularity  of  the  payments  to 
be  made  by  the  employe  became  a  question,  as  well  as  the 
question  of  who  should  now  make  the  payments.  The  Approved 
Societies,  through  which  the  insurance  act  operated  in  part,  were 
seriously  affected  by  the  change  in  industrial  and  financial  con- 
ditions, with  the  result  that  the  financial  condition  of  such 
societies  became  serious.^ 

The  problem  of  making  provision  for  discharged  and  disabled 
soldiers  arose. 

It  was  found  by  a  committee  appointed  to  investigate  the  con- 

^  For  further  details,  see  Care  of  Dependents  of  Enlisted  Men  in  Canada, 
S.  Herbert  Wolfe,  U.  S.  Department  of  Labor,  Miscellaneous  Series,  No.  10. 
*  See  Nineteenth  Century  and  After,  No.  485,  July,  1917. 


EFFECT   ON    SOCIAL    INSURANCE   AND   PENSIONS  1 59 

dition  of  the  Approved  Societies,  that  the  actual  expenditures 
for  sickness  insurance  and  maternity  benefits  had,  for  the  years 
1913,  1914,  1915.  and  1916,  far  exceeded  the  expected  and  cal- 
culated outlays/ 

All  these  and  other  complications  which  arose  necessitated 
a  modification  of  the  National  Insurance  Act.  The  voluntary 
features  of  the  act  were  limited.  The  benefits  were  extended 
to  additional  classes,  especially  to  the  late  entrants.  Another 
feature  of  the  act,  which  did  not  work  satisfactorily,  was  that 
which  required  the  state  to  pay  one  penny  weekly  when  the 
wage  did  not  exceed  two  shillings  a  day.  The  societies  had 
the  chief  work  of  collecting  the  state  penny  and  the  low  wage 
earner  had  proved  to  be  the  most  expensive  type  of  member, 
from  the  administrative  viewpoint. 

The  report  of  Sir  Gerald  Ryan's  commission  recommended 
that  the  burden  of  collecting  the  penny  be  placed  on  the 
employer.^ 

In  other  respects  the  act  has  been  changed  to  provide  for  the 
new  conditions  surrounding  wage  earners  during  war  times.  It 
is  difficult  to  hazard  a  guess  in  regard  to  the  final  effects  which 
the  war  will  have  in  England  on  the  various  phases  of  social 
insurance.  On  the  one  hand  there  are  to  be  considered  the  effects 
on  such  social  legislation  which  result  from  the  fact  that  the 
people  and  the  government  are  hard  put  to  it  to  raise  the 
enormous  funds  which  are  necessary  to  prosecute  the  war.  There 
is  a  disposition  to  reduce  wherever  possible  state  expenditures, 
and,  therefore,  social  insurance  is  likely  to  suffer.  On  the  other 
hand  there  is  increasing  evidence  of  the  more  powerful  influence 
which  is  being,  and  will  in  the  future  be,  exerted  on  legislation 
by  the  wage-earning  class,  and  as  a  result  of  the  increasing  influ- 
ence on  government  of  this  class,  it  may  well  happen  that  social 
insurance  will  be  extended. 

It  is  in  connection  with  the  different  provisions  which  have 
been  made  for  soldiers  and  sailors  and  their  dependents  in  En- 

'  See  The  Economist,  vol.  Ixxxii,  No.  3797,  p.  1063. 
•  Ibid.,  vol.  Ixxxiii,  No.  3823,  p.  1033. 


l6o  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

gland,  that  the  most  significant  results  in  securing  the  ends  in 
view  under  social  insurance  have  been  achieved.  Allowances 
may  be  paid  to  wives  and  other  dependents  while  the  man  is 
in  the  military  or  naval  service;  other  allowances  may  be  made 
to  such  a  man  in  case  he  can  prove  that  certain  financial  losses 
under  contractural  obligations  would  result  in  case  his  payments 
are  not  made;  disability  pensions  may  be  paid  for  injuries  or 
disease  resulting  from  such  service;  and,  finally,  pensions  may 
be  paid  to  wives  and  other  dependents  in  case  of  death  in  the 
service.  The  contractural  financial  obligations  for  which  an 
allowance  may  be  granted  include :  interest  and  instalments  on 
certain  loans,  rent  on  furniture  or  property,  insurance  premiums, 
taxes  and  school  tuition.  ». 

The  separation  or  family  allowances  are  paid  to  those  directly 
dependent  upon  the  soldier  or  sailor.  Wives  may  receive  this 
allowance  if  the  husband  makes  an  allotment  of  his  pay,  and  in 
the  army  such  allotment  is  compulsory  except  for  officers.  The 
minimum  is  85  cents  per  week.  In  the  navy  such  an  allotment 
is  not  compulsory,  but  no  allowance  is  granted  unless  such  an 
allotment  is  made  by  the  husband.  A  separation  allowance  is 
made  for  children,  but  no  allotment  from  pay  is  required,  and 
these  allowances  continue  until  the  child  reaches  the  age  of 
sixteen,  and  may,  under  certain  circumstances,  continue  until 
the  age  of  twenty-one. 

Disability  pensions  are  paid  to  those  who  are  discharged  from 
the  service  with  a  certificate  that  such  disability  is  due  to  such 
service.  The  amount  paid  depends  upon  the  degree  of  disability 
and  rank.  Allowance  in  the  pension  is  made  for  dependent 
children.  The  earnings  of  the  disabled  soldier  or  sailor  before 
the  war  may  be  taken  as  a  basis  of  award,  if  this  method  is 
demanded  by  the  disabled  one.  In  no  case  can  his  personal 
allowance  and  that  for  the  children  exceed  $18.24  a  week. 

Provision  is  made  for  treatment  and  training  of  the  disabled 
one.  All  the  members  of  the  army  and  the  navy  are  required 
to  be  insured  under  the  National  Insurance  Act  and  hence  they 
receive  the  sums  to  which  they  are  entitled  in  case  of  disability 


EFFECT    ON    SOCIAL   INSURANCE   AND    PENSIONS  l6l 

under  this  law,  as  well  as  these  special  disability  allowances 
under  the  regulations  for  military  and  naval  service.  This  fact 
should  be  kept  in  mind  when  any  comparison  is  made  with 
awards  established  for  such  men  by  other  countries.  Special 
provisions  are  made  for  pensions  to  officers,  which  are  higher 
than  those  to  privates. 

One  of  the  most  important  provisions  of  the  new  pension  act 
is  that  which  makes  an  allowance  to  the  widow  on  the  basis  of 
the  prewar  earning  power  of  the  husband.  If  death  results  to 
the  soldier,  sailor  or  marine  while  in  active  service,  or  if  death 
results  from  injuries  received  in  such  service  within  seven  years 
of  receiving  such  wounds  or  injuries,  his  widow,  children  and 
dependents  may  receive  a  pension.  Even  though  death  results 
from  injuries  not  attributable  to  such  service,  the  widow  may 
receive  a  pension,  payable  during  the  period  of  the  war  and  for 
twelve  months  thereafter. 

The  permanent  pension  which  the  widow  receives  equals  one- 
half  the  sum  the  husband  would  have  received  if  he  had  been 
totally  disabled.  The  widow  is  allowed  $14.60  for  funeral  ex- 
penses, as  compared  to  the  $100  which  is  allowed  under  the 
allowance  act  of  the  United  States.  If  the  widow  can  show 
that  her  pension  and  that  for  the  children  granted  under  the 
dependency  act  is  less  than  one-half  of  what  her  husband  earned 
in  prewar  times,  she  may  be  granted  in  lieu  of  these  ordinary 
pensions  a  sum  equal  to  one-half  of  this  prewar  earning  of  the 
husband,  provided  that  $18.24  is  used  as  the  maximum  weekly 
wage  for  this  purpose;  that  is,  under  this  plan  the  maximum 
weekly  allowance  for  the  widow  and  her  children  would  be 
$9.12  a  week.  This  again  is  much  lower  than  the  similar  allow- 
ance in  the  United  States,  but  again  caution  must  be  given  in 
making  such  comparisons,  since  in  the  United  States  there  is  no 
compulsory  national  insurance  act  under  which  the  similarly 
placed  widow  in  Great  Britain  might  receive  certain  sums. 

The  pensions  for  dependents  of  officers  are  based  both  on 
rank  and  on  causes  of  death,  and  are  higher  than  those  to 
privates.    The  widow  of  the  officer  may  also  choose  as  a  basis 


1 62  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

for  the  award  the  income  of  her  deceased  husband  in  prewar 
times. 

Dependents  other  than  widows  and  children  may  receive  pen- 
sions. For  example,  parents  may  be  pensioned  when  they  become 
incapable  of  self-support. 

In  addition  to  these  governmental  allowances,  a  private  organ- 
ization collects  from  private  individuals  a  patriotic  fund  which 
is  distributed  to  soldiers,  sailors  and  families  whose  allowances 
and  pensions  are  not  sufficient. 

It  will  be  understood,  therefore,  that  the  provisions  made  under 
these  laws,  ordinances,  and  decrees  of  Great  Britain,  together 
with  the  social  insurance  system  previously  adopted,  secure  a 
large  measure  of  protection  for  the  soldiers,  sailors  and  their 
dependents.  These  allowances  are  not  as  generous  as  those  in 
the  United  States  and  do  not  include  any  provision  for  ordinary 
life  insurance.  But  as  compared  with  earlier  measures  in  the 
European  nations  for  the  protection  of  soldiers,  sailors  and  their 
families,  such  provisions  may  well  be  considered  liberal.^ 

Social  Insurance  and  Pensions  in  France 

In  France  there  are  a  family  allowance,  during  the  absence 
of  the  head  in  the  service  of  the  nation,  and  a  pension  to  the 
soldier  upon  retirement  after  a  period  of  service,  or  to  the  widow 
upon  the  death  of  the  husband  in  service,  or  as  a  result  of  injuries 
incurred  while  in  service.  The  assignment  of  a  part  of  the  pay 
of  the  soldier  is  of  little  significance,  since  this  pay  for  a  private 
is  only  4.8  cents  per  day.  For  those  above  the  rank  of  private 
there  is  provision  for  voluntary  assignment  of  part  of  the  pay 
to  the  family  and  under  certain  conditions  assignment  by  the 
military  officials,  but  upon  request  of  the  officer  such  assignment 
is  discontinued.  The  assignment  of  military  pay  is  thus  a  volun- 
tary matter,  even  for  those  ranking  above  the  private. 

However,  the  separation  allowance  in  France  is  more  general 
than  in  either  the  United  States  or  Great  Britain.  It  was  first 
'  For  further  details,  see  the  study  of  Capt.  S.  Herbert  Wolfe,  op.  cit. 


EFFECT   ON   SOCIAL   INSURANCE   AND   PENSIONS  163 

established  in  times  of  peace  and  "  applies  to  all  needy  families 
of  enlisted  men  whether  French,  living  in  France,  the  colonies,  or 
abroad,  or  those  of  allied  nations  living  in  France  whose  bread- 
winners have  joined  their  own  or  the  French  colors,  and  also 
all  needy  French  families  residing  in  France,  whose  bread- 
winner— not  a  soldier — is  without  fault  of  his  own  a  victim  of 
a  circumstance  of  war  suffered  on  French  soil  in  a  region  occu- 
pied by  the  French  army."  ^  This  allowance  for  such  dependents 
amounts  to  about  40  cents  per  day  and  is  thus  intended  to 
prevent  destitution  and  not  to  provide  for  the  normal  needs  of 
the  dependents. 

France  also  makes  allowances  for  maternity  benefits,  since  the 
population  question  has  in  this  nation  been  one  of  concern  to  its 
people,  because  of  the  fact  that  there  has  been  little  or  no  net 
increase  in  the  general  population  during  recent  years.  For  the 
same  reason  there  has  been  granted  an  allowance  or  subsidy 
for  large  families.  It  is  an  annual  grant  and  varies  from  $11.58 
to  $17.37  for  each  child  under  13  years  of  age,  if  there  are  more 
than  three  children,  if  both  parents  care  for  the  children.  Mani- 
festly, this  applies  only  to  the  needy  families  and  is  in  addition 
to  the  separation  allowance. 

There  are  also  pensions  for  widows  and  orphans,  service 
pensions,  and  disability  pensions.  These  are  very  inclusive  and 
liberal  in  their  application,  although  the  amounts  granted  are 
much  less  than  those  given  under  the  same  acts  in  the  United 
States. 

War  AND  Germany's  Social  Insurance 

Social  insurance  received  such  early  consideration  and  ex- 
tensive development  in  Germany  and  the  plans  adopted  there 
have  been  studied  and  imitated  to  such  an  extent  in  other  nations, 
that  a  more  extensive  consideration  of  the  German  social  insur- 
ance and  its  modifications  due  to  the  war  deserves  a  more  detailed 
discussion. 

'  Study  by  Capt.  S.  Herbert  Wolfe,  op.  cit. 


164  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

A  recent  writer  gives  the  following  concise  statement  of  the 
leading  features  of  the  German  plan  of  social  insurance  and  its 
chief  modifications  due  to  the  war.^ 

To  understand  fully  the  effect  of  the  present  world  war  on  the  German 
system  of  social  insurance,  it  will  be  first  necessary  to  examine  at  some  length 
just  what  the  system  was  before  August  i,  1914,  and  what  changes  have 
since  been  made  in  it. 

Though  the  German  system  is  commonly  spoken  of  as  state  insurance, 
this  is  only  in  a  measure  true.  The  element  of  state  compulsion,  regulation 
and  control  is  always  present,  but  with  the  exception  of  invalidity  and  old- 
age  insurance,  the  state  does  not  assume  directly  any  financial  responsibility, 
collect  premiums,  nor  pay  the  losses,  nor  guarantee  the  deficit.  However, 
the  degree  of  supervision,  as  well  as  compulsion,  distinguishes  it  from  volun- 
tary stock  or  mutual  associations. 

Sickness  insurance  functionates  through  mutual  associations  ^of  workmen, 
the  central  government  authorities  undertaking  this  only  when  no  such  asso- 
ciations exist.  When  the  system  was  inaugurated,  some  thirty  years  ago, 
the  various  voluntary  sick  benefit  societies  were  kept  up,  and  where  none 
existed,  new  ones  were  founded.  Of  the  many  varying  types,  only  three 
were  of  primary  importance:  (i)  Local  funds  organized  in  occupational  or 
industrial  lines ;  (2)  establishment  funds  and  (3)  communal  insurance.  As 
the  communal  insurance  was  replaced  in  191 1  by  the  "  Landkrankenkasse," 
a  sick  fund  for  the  benefit  alike  of  agricultural  workers  and  wage  earning 
groups  in  cities,  at  present  the  local  and  establishment  funds  are  the  two 
main  types  of  sick  insurance  in  Germany. 

At  the  outbreak  of  the  war,  approximately  eighteen  of  Germany's  sixty- 
six  millions  of  population  were  insured  against  sickness.  Immediately  the 
membership  of  various  societies  fell  off  alarmingly.  For  example,  the  Berlin 
Ortskrankenkasse  lost  280,000  out  of  500,000  members,  while  in  some  cases 
the  number  dropping  out  equaled  70  per  cent  of  the  original  membership. 
This  was  due  to  unemployment  and  the  calling  of  men  to  the  colors. 

It  was  thought  that  the  diminished  premium  receipts  would  be  accom- 
panied by  greater  demands  due  to  sickness  contracted  at  the  front  and  the 
weakness  of  those  left  at  home,  who  had  to  do  unusual  and  more  arduous 
work.  Hence,  emergency  laws  were  passed  in  many  cases  raising  the  rate 
of  contribution  to  4>4  per  cent  of  wages.  However,  requests  for  help  have 
greatly  decreased,  both  from  patriotism  and,  it  seems,  because  the  war  has 
had  the  psychological  effect  of  increasing  the  people's  resistance  toward 
real  and  imaginary  diseases.  This  lessening  of  demands  on  the  funds  of 
the  societies  might  have  been  anticipated,  particularly  as  before  the  war, 
according  to  the  Fourth  Special  Report  of  the  United  States  Commission 
of  Labor,  laborers  called  for  help  in  every  petty  illness  (Unwohlsein)  and 
very  often,  especially  when  work  was  slack,  came  with  no  illness  what- 
ever in  an  attempt  to  get  from  the  funds  as  much  as  possible. 

'  The  Economic  World,  n.  s.,  vol.  xi,  No.  14,  p.  319. 


I 

EFFECT   ON   SOCIAL   INSURANCE   AND   PENSIONS  165 

A  new  law  that  is  hard  on  the  funds  of  the  societies  is  the  "  Kriegswochen- 
hilfen,"  by  which  a  weekly  war  help  is  extended  to  the  wives  of  those  injured 
while  at  the  front.  This  expense  is  mainly  met  by  the  government,  but  the 
societies  help  in  many  cases. 

The  efficiency  of  the  sick  benefit  societies,  whether  city,  rural,  factory  or 
trade,  has  been  safeguarded  by  many  regulations ;  among  other  things  the 
allowances  have  been  limited  to  the  normal  or  minimum  rates,  while  the 
dues  have  been  fixed  upon  4  per  cent  of  the  basic  wages.  Only  when  the 
standing  of  a  society  is  exceptionally  good  are  greater  benefits  and  lower 
dues  permitted. 

On  December  3,  1914,  legislation  was  enacted  providing  for  a  universal 
childbirth  benefit  to  be  paid  mostly  by  the  individual  societies,  though  aided 
by  the  federal  insurances.  The  law  is  a  heavy  burden  to  the  societies,  though 
of  great  service  to  the  nation.  As  in  time  of  peace  introducers  of  this 
measure  had  always  been  unable  to  pass  it,  it  may  be  said  that  instead  of 
limiting  the  war  has  in  some  instances  widened  the  scope  of  social  legisla- 
tion. However,  in  other  cases  the  opposite  is  true ;  to  illustrate,  proposed 
accident  insurance  for  home  workers  (Hausgewerbeversicherung)  has  been 
given  up,  in  accordance  with  a  general  policy  of  curtailment  in  this  branch 
of  social  insurance. 

At  first  there  was  some  doubt  whether  sick  or  wounded  soldiers  were 
entitled  to  sick  benefits  as  they  were  being  cared  for  in  the  army  hospitals, 
but  this  was  decided  in  their  favor.  Death  benefits,  also,  are  paid,  irrespec- 
tive of  all  claims  to  army  and  navy  pensions.  The  claim  to  sick  benefits  may 
be  expected  to  last  long  after  the  war,  as  the  constitutions  of  many  of  those 
at  the  front  will  have  been  undermined. 

Voluntary  insurance  has  greatly  aided  the  societies.  Not  only  have  many 
soldiers  continued  their  payments,  but  in  other  cases  these  dues  have  been 
paid  for  them  by  their  employers  or  municipalities,  as  in  the  case  of  Leipzig 
and  Liegnitz.  "  The  City  of  Leipzig  enrolls  every  married  soldier  living 
within  its  confines  in  the  appropriate  sickness  society,  and  pays  all  the 
required  dues,  while  Liegnitz  insures  all  soldiers  whether  married  or  un- 
married." 

"  In  consequence  of  the  widespread  voluntary  insurance  and  the  almost 
universal  disappearance  of  unemployment,  the  membership  of  the  sickness 
societies  has  again  approached  comparatively  normal  figures.  Augmented 
dues  have  ended  all  fear  of  financial  difficulties,  and  the  societies  are  already 
advocating  the  repeal  of  the  emergency  war  legislation  so  far  as  it  applies 
to  them." 

Accident  Insurance  in  Germany 

The  accident  insurance  system  may  next  be  considered.  This  provides  for 
mutual  associations  of  employers  (Berufsgenossenschaften)  which  are  con- 
trolled by  the  state  and  membership  in  which  is  compulsory.  Employers  are 
combined  in  groups  according  to  industry,  the  groups  comprising  in  some 
cases  whole  industries  and  in  other  large  areas  of  the  country,  as  is  done, 


I 

l66  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

for  example,  with  engineering,  the  building  trades  and  agriculture.  When 
the  geographical  or  industrial  limits  of  a  mutual  association  are  too  wide  for 
efficient  centralized  management,  the  association  may  be  divided  into  what 
are  known  as  "  sections,"  which  are  in  most  matters  autonomous,  questions 
of  the  utmost  importance  alone  being  referred  to  the  main  organization. 

In  all  associations  except  that  for  the  building  trades,  the  so-called 
"  Current  Cost  System  "  is  used.  That  is  to  say,  the  premiums  charged  are 
only  sufficient  to  pay  current  costs  and  not  to  set  up  reserves  against  the 
future  cost  of  present  indemnities.  In  the  case  of  the  building  trades,  how- 
ever, according  to  the  Twenty-fourth  Annual  Report  of  the  United  States 
Commission  of  Labor,  the  basis  for  the  calculation  of  the  premiums  is  the 
capitalized  value  of  the  payments  which  the  insurance  institute  will  probably 
have  to  make  for  accidents  on  building  operations  lasting  more  than  six 
days. 

Under  the  current  cost  system,  which  was  introduced  both  to  make  the 
burden  of  accident  insurance  as  light  as  possible  upon  the  employers  during 
the  early  years  of  its  inception  and  because  of  the  difficulty  of  computing  a 
proper  premium  rate,  the  commuted  value  of  present  accidents  is  not  con- 
sidered. Only  enough  money  is  assessed  to  meet  liabilities  which  have 
actually  accrued.  The  result,  of  course,  is  that  the  yearly  disbursements  of 
the  associations  are  steadily  on  the  increase,  due  to  the  accumulating  carry- 
over payments  against  accidents  which  have  occurred  in  the  earlier  years. 
It  has  been  calculated  that  under  normal  conditions  annual  payments  would 
have  increased  up  to  the  year  1935,  when  they  would  have  become  practically 
constant,  as  by  that  time  the  number  of  carry-over  payments  stopping  each 
year  would  be  approximately  equal  to  the  new  carry-over  payments  added. 
The  total  of  disbursements  in  any  one  year  tends  to  become  equal  to  the 
capitalized  cost  of  the  accidents  during  that  year.  It  would  seem  that  the 
heavy  future  costs  incurred  through  war  conditions  can  not  but  postpone  the 
year  at  which  disbursements  will  become  constant.  What  this  postponed 
date  will  be,  however,  it  is  at  present  impossible  even  to  hazard  a  guess. 

As  a  guard  against  violent  fluctuations  in  the  total  of  annual  payments  and 
hence  in  the  assessments  made  against  employers,  a  certain  reserve  is,  to  be 
sure,  accumulated  by  the  associations.  It  is  interesting  to  note  that  Mr. 
Tecumseh  Sherman,  recognized  as  an  authority  on  the  subject,  states  that, 
in  his  opinion,  this  is  in  reality  a  disguised  war  reserve.  This  hypothesis 
seems  to  be  substantiated  by  the  fact  that  the  industrial  and  agricultural 
employers  associations  have  subscribed  eighty  and  ten  million  marks,  respec- 
tively, to  the  first  two  German  war  loans. 

In  spite  of  this  use  of  reserve  funds,  accident  insurance  has  been  much 
less  affected  by  the  war  than  was  expected  by  many,  less,  in  fact,  than  has 
been  sickness  insurance.  When  the  war  started,  some  twenty-five  million 
persons  were  insured  against  accidents  under  the  compulsory  system.  All 
pensions  previously  granted  had,  of  course,  to  be  continued,  as  well  as  new 
accidents  compensated.  Many  of  the  employers  could  not  pay  the  current 
cost  for  the  year,  due  to  bankruptcy  or  absence  because  of  military  duty 
and  also  because  "  payments  could  not  be  obtained  from  any  of  the  indus- 


EFFECT   ON    SOCIAL   INSURANCE   AND   PENSIONS  167 

trial  enterprises  owned  and  conducted  by  citizens  of  hostile  powers."  Fur- 
thermore, a  much  higher  accident  rate  was  expected,  due  to  the  replacement 
of  skilled  workers  by  less  able-bodied  and  untrained  hands  and  in  many 
cases  the  substitution  of  women  for  men  workers.  Again  many  safer  occu- 
pations were  given  up  for  the  more  dangerous  manufacture  of  munitions 
and  chemicals,  where  many  employes  are  unskilled,  even  though  experienced 
in  their  former  pursuits. 

To  offset  this,  lump-sum  payments,  formerly  the  rare  exception,  have  now 
in  all  cases  been  forbidden,  the  trades  associations  giving  more  and  more 
benefits  in  the  form  of  hospitals,  convalescent  homes,  societies  for  cripples, 
schools  and  like  institutions.  Should  a  financial  shortage  occur,  it  will  be 
met  by  the  government,  as  has  already  been  done  in  the  case  of  the  building 
trades.  Other  protective  measures  suggested  a.  e  the  merging  of  financially 
weak  associations  with  those  of  greater  strength,  as  well  as  a  plan  for  a 
general  compulsory  reinsurance  between  all  associations.  If  these  protective 
measures  should  prove  insufficient,  the  compensation  of  minor  incapacities, 
entailing  disabilities  of  less  than  20  per  cent,  may  have  to  be  given  up,  though 
it  is  doubtful  if  Germany  will  have  to  do  this  in  the  near  future.  However, 
an  attempt  may  be  made  to  lighten  the  burden  by  drawing  up  a  somewhat 
modified  scale  of  pensions,  for  the  present  scale  is  often  too  high,  under 
frequent  conditions  exceeding  the  wage  loss. 

Old  Age  Insurance  in  Germany 

The  third  branch  of  social  insurance  is  that  of  old  age  and  invalidity.  This 
system  is  compulsory  for  all  wage  workers  in  industry,  transportation,  com- 
merce, agriculture  and  domestic  service ;  and  for  salaried  employes  earning 
less  than  two  thousand  marks  per  annum.  Furthermore,  a  provision  is  made 
for  voluntary  insurance  for  many  who  are  not  included  in  the  above  cate- 
gories. The  insured  and  the  employer  each  contribute  the  same  premium, 
while  the  state  gives  one  uniform  bonus  to  each  maturing  pension.  Weekly 
payments  are  made  according  to  a  graded  scale  of  five  wage  groups.  The 
pension  for  old  age  is  given  at  the  age  of  seventy,  but  invalidity  is  estab- 
lished as  soon  as  the  earning  capacity  is  reduced  to  one-third  the  normal. 
The  organization  and  administration  of  this  system  of  insurance  are  bureau- 
cratic in  character.  Most  of  the  administrative  bodies  are  known  as 
"  Versicherungsanstalten,"  insurance  institutions  which  may  be  described  as 
pension  boards.  They  are  organized  by  the  governments  of  the  various 
states,  being  formed  either  for  large  local  government  areas,  as  in  the  case 
of  Berlin,  for  divisions  of  a  state,  or  for  an  entire  state  or  combination  of 
states. 

The  war  has  been  a  great  hardship  to  this  system.  Workmen  entering  the 
German  military  service  are  treated  as  still  insured  against  invalidity  and 
old  age  disabilities,  but  are,  however,  excused  from  paying  their  dues.  This 
even  applies  to  noncombatants  who  were  interned  in  a  foreign  country,  as 
in  the  case  of  German  waiters  in  London. 

When  the  war  broke  out,  sixteen  million  persons  were  insured  under  this 


l68  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

system.  Receipts  of  the  Landesversicherungs  Anstalten  in  1914  were 
678,388,373  marks  as  opposed  to  750,610,659  in  191 3.  Receipts  for  the  first 
seven  months  in  1915  were  25,000,000  marks  less  than  for  the  same  period 
in  1914.  These  smaller  receipts  have  been  accompanied  by  increased  demands. 
The  Anstalten  have  appropriated  about  5,000,000  marks  for  war  relief  pur- 
poses, have  aided  societies  for  providing  food,  clothing  and  fuel  for  the 
needy  and,  according  to  a  recent  "  Weekly  Report "  of  the  American  Asso- 
ciation of  Commerce  and  Trade,  Berlin,  have  also  subscribed  $139,000,000 
to  the  German  war  loans.  In  spite  of  these  considerations,  the  various 
Anstalten  will  meet  their  obligations,  as  they  have  reserve  funds  exceeding 
$5,000,000.  Moreover,  their  solvency  is  guaranteed  by  the  German  states, 
and  so  as  long  as  these  retain  their  credit,  the  system  will  continue. 

It  is  not  possible  to  determine  how  much  of  the  reserves  for  the  various 
pension  funds  have  been  invested  in  national  bonds,  but  doubtless,  according 
to  Mr.  Miles  M.  Dawson,  a  very  large  proportion  of  the  funds  which  were 
not  invested  at  the  time  the  war  broke  out  have  been  put  into  such  securities. 
Should  the  payment  of  the  interest  and  principal  of  these  bonds  be  withheld, 
the  entire  insurance  system  would  be  threatened.  It  seems  most  unlikely 
that  this  will  happen  in  the  immediate  future,  as  at  present  the  financial 
pressure  in  Germany,  including  her  new  bond  issues,  is  apparently  quite 
low. 

What  the  ultimate  fate  of  the  German  system  of  social  insurance  will  be 
is  impossible  to  say.  We  can,  however,  consider  those  factors  which  will 
be  most  important  in  determining  what  will  take  place  when  peace  is  con- 
cluded. 

The  duration  of  the  war  is  the  first  consideration  to  suggest  itself,  for 
the  longer  the  hostilities  continue  the  less  chance  will  the  system  have  of  con- 
tinuing in  essentially  its  present  form.  Furthermore,  the  final  ratio  of  crip- 
ples to  total  working  population  is  a  matter  of  the  utmost  importance.  If 
it  be  too  large,  the  system  will  necessarily  break  down. 

We  also  have  to  take  into  account  the  question  of  war  indemnity.  Three 
possibilities  must  be  distinguished  in  this  regard :  no  indemnity  may  be  paid, 
Germany  may  receive  one,  or  Germany  may  have  to  pay  one.  The  first  of 
these  three  possibilities  seems  to  be  the  most  likely.  However,  should  Ger- 
many receive  an  indemnity,  to  what  use  will  it  be  put?  This  depends 
largely  on  the  status  of  the  nations  at  the  close  of  the  war.  Should  peace 
be  a  mere  makeshift,  the  nations  discontented,  and  another  war  imminent,  it 
seems  probable  that  Germany  will  save  the  indemnity  in  its  entirety  as  was 
done  after  the  Franco-Prussian  War.  But  should  peace  appear  to  be  rela- 
tively permanent,  without  doubt  a  large  portion  of  the  funds  will  be  used 
in  helping  the  insurance  associations.  On  the  other  hand,  should  a  large 
enough  indemnity  be  exacted  from  Germany,  the  financial  pressure  may  be- 
come great  enough  to  force  the  abandonment  of  all  forms  of  social  insur- 
ance, or  the  repudiation  of  debts,  followed  by  the  consequences  mentioned 
before. 

The  industrial  condition  of  Germany  after  the  war  must  be  considered  in 
any  discussion  of  this  character.    The  war  will  be  won,  not  so  much  by  the 


EFFECT   ON   SOCIAL    INSURANCE   AND   PENSIONS  1 69 

strongest  nation,  in  a  military  sense,  as  by  that  nation  which  is  least 
exhausted  economically.  It  is  a  war  of  exhaustion.  And  yet,  the  historical 
record  shows  that  practically  every  war  within  the  last  few  centuries  has 
been  followed  by  a  wave  of  prosperity  in  the  lands  whose  people  have 
returned  from  the  battlefield.  There  seems  little  reason  that  this  should 
not  happen  again  as  it  has  done  in  the  past,  though  it  is  unsafe  to  apply 
with  too  much  certainty  to  the  present  world  war  any  axioms  derived  from 
former  experience.  If  the  hoped-for  prosperity  does  materialize,  the  burden 
of  caring  for  the  sick,  the  injured,  the  invalids  and  the  aged  would  be 
greatly  lightened. 

These  are  the  factors  which  will  be  most  influential  in  determining  the 
future  of  the  social  insurance  in  Germany,  though  doubtless  others  will  play 
their  part.  And  yet,  taking  into  account  only  those  considered  above,  it 
would  seem  presumptuous  for  any  one  to  undertake  to  prophesy  what  the 
ultimate  fate  of  the  system  will  be.  Even  an  opinion  would  have  to  be  so 
modified  and  conditioned  as  to  be  almost  valueless.  However,  it  is  safe  to 
assert  that,  up  to  the  present,  Germany's  system  of  social  insurance  has 
more  than  realized  the  hopes  of  its  fondest  advocate.  It  is  performing  in 
war,  and  bids  fair  to  continue,  those  same  great  services  which  it  has  ren- 
dered so  well  in  times  of  peace. 

Family  allowances  varying  in  amount  from  $1.79  monthly 
to  $3-57  ^re  paid  the  family  of  soldiers,  the  minimum  being 
paid  by  the  imperial  treasury  and  the  remaining  from  the  local 
treasuries.  The  amount  is  adjusted  to  the  season  of  the  year, 
to  correspond,  it  is  assumed,  to  the  pressing  needs  of  the  family. 
In  any  case,  the  separation  allowance  is  paid  only  in  case  of 
need,  and  the  need  is  determined  by  the  amount  the  family  is 
assessed  for  taxes.  The  size  of  the  family  also  affects  the  grant 
of  this  separation  allowance. 

Soldiers  may  also  assign  a  part  of  their  pay  if  it  is  necessary 
to  support  the  family,  but  only  in  case  of  necessity,  and  then 
only  to  the  wife  and  children  or  to  such  members  of  the  family 
as  were  wholly  or  chiefly  dependent  upon  the  soldier. 

There  is  also  an  indemnity  to  families  whose  sons  had  served 
six  years  as  privates  or  noncommissioned  officers.  Payments 
under  this  act  stop  six  months  after  the  son  is  dismissed  from 
the  service  or  dies. 

Maternity  benefits  were  granted  under  the  social  insurance  law 
of  191 1,  and  these  have  been  extended  to  meet  the  new  condi- 
tions brought  about  by  the  war. 


170  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

Pensions  in  Germany 

The  disability  pensions  in  Germany  depend  upon  the  rank, 
the  salary,  the  length  of  service,  and  the  extent  of  the  disability. 
The  minimum  disability  pension  for  a  private  is  $128.63,  a  sum 
much  lower  than  that  in  the  United  States.  In  addition  to  the 
regular  disability  pension,  there  are  a  military  bonus  for  special 
disabilities,  such  as  loss  of  sight,  a  war  bonus,  an  old  age  bonus, 
an  aviation  bonus,  and  a  tropical  bonus,  the  sums  being  in  addi- 
tion to  the  ordinary  pension.  There  may  also  be  granted  to 
privates  and  noncommissioned  officers  a  certificate  to  the  effect 
that  the  holder  is  entitled  to  a  claim  to  a  post  in  the  civil  service. 

Service  pensions  for  life  and  increasing  with  years^of  service 
are  established  for  privates  and  noncommissioned  officers  who 
have  served  in  excess  of  eighteen  years  and  are  not  entitled  to  a 
disability  pension. 

The  widow  of  a  soldier  receives  a  pension  until  she  remarries, 
and  an  allowance  is  also  made  for  each  legitimate  child  under 
eighteen  years  of  age  if  unmarried.  In  general,  the  widow's 
pension  varies  from  $71,46  a  year  to  $1191  a  year,  A  war 
pension  is  granted  if  the  soldier  died  in  battle  or  as  a  result  of 
an  injury  received  in  war,  provided  death  occurs  within  ten 
years  after  the  conclusion  of  peace.  The  amount  of  the  war 
pension  is  adjusted  to  the  rank  of  the  deceased  and  to  the  amount 
received  under  the  general  pension  just  described. 

The  calculations  for  these  pensions  and  other  grants  for  mili- 
tary and  naval  services,  as  well  as  the  payments  under  the  Social 
Insurance  Acts,  are  the  result  of  elaborate  calculations  and  the 
most  systematic  arrangements  and  adjustments. 

In  lieu  of  these  pensions  a  lump  sum  may  be  granted  to  disabled 
soldiers  and  widows  for  the  purpose  of  acquiring  or  improving 
landed  property  or  cooperating  in  building  or  colonizing  asso- 
ciations. These  amounts  are  multiples  of  the  annual  pensions 
and  are  limited  to  those  pensions  between  the  ages  of  21  and  55 
and  to  those  purposes  whose  economic  success  is  guaranteed. 

The  most  striking  features  of  the  German  system  of  social 


EFFECT   ON    SOCIAL   INSURANCE   AND    PENSIONS  I7I 

insurance  and  pensions  are,  thus,  its  systematic  and  scientific 
character  and  its  inclusiveness.  It  is  undoubtedly  most  care- 
fully thought  out  and  planned  for  the  future  ends  to  be  achieved. 


Social  Insurance  in  Austria 

Austria's  social  insurance  system  was  neither  as  inclusive  nor 
as  well  developed  as  that  in  Germany,  a  result,  in  part,  of  the 
absence  of  unity  of  the  people  in  this  nation  and  the  industrial 
development,  which  is  far  behind  that  of  Germany.  The  different 
allowances  and  pensions  follow  the  plan  in  Germany.  Allow- 
ances are  provided  for  the  family  of  the  soldier  who  is  called 
to  the  colors,  and  special  allowances,  as  in  England,  may  be  made 
for  rent,  insurance  and  other  family  expenses  of  this  character. 
This  family  allowance  may  not  exceed  the  average  daily  earnings 
of  the  soldier  in  peace  times.  If  the  soldier  is  totally  disabled 
he  receives  an  annual  allowance,  and  with  other  family  allow- 
ances in  the  event  of  this  disability  the  family  may  receive  a 
maximum  sum  of  $121.56.  This  sum  again  illustrates  that,  as 
measured  by  the  allowances  in  the  United  States,  such  allow- 
ances in  the  European  nations  are  very  small.  The  widow  and 
children  also  receive  allowances  in  case  of  the  death  of  the 
breadwinner. 

The  disability  pension  is  adjusted  to  the  period  of  service 
after  ten  years  of  such  service.  Bonuses  are  added  to  this 
pension  for  such  circumstances  as  being  wounded  in  battle. 

There  are  also  dependent  pensions  which  apply  to  the  widow, 
not  only  in  case  of  death  of  the  husband  during  times  of  war, 
but  also  upon  death  during  active  service  in  times  of  peace. 
In  this  case  bonuses  are  also  allowed  for  death  in  br.ttle. 

The  widow  may  have  a  claim  to  a  civil  as  well  as  to  a  military 
pension,  but  only  the  latter  is  allowed  if  the  husband  died  in 
military  service.  If  this  military  pension  allowance  is  less  than 
the  civil  pension,  the  difference  is  made  up  from  the  civil  pension 
fund. 

Pensions  cease  upon  remarriage,  except  that  in  case  of  death 


172  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

of  the  second  husband,  she  may  draw  a  pension  from  the  first 
husband  in  case  she  is  left  destitute.  Allowances  are  made  for 
children  up  to  the  ordinary  age,  but  such  allowances  are,  like 
the  preceding,  much  lower  than  those  in  the  United  States. 

Social  Insurance  in  Italy 

In  Italy  the  state  has  monopolized  the  business  of  life  insur- 
ance, and  had  established  a  system  of  social  insurance  which 
had  not  up  to  the  outbreak  of  the  war  secured  extensive  actual 
application. 

The  recent  wars  in  which  Italy  has  been  engaged  and  the 
enormous  strain  under  which  the  people  have  been  placed  by 
the  present  war,  make  the  outlook  for  social  insurance  in  this 
country  somewhat  doubtful,  although,  as  in  other  nations,  the 
increasing  political  power  of  the  masses  may  insist  upon  an 
extension  after  the  war  of  social  insurance. 

The  family  allowances  and  pension  systems  in  operation  in 
this  country  at  the  beginning  of  the  war  proved  inadequate,  and 
there  has  been  in  general  a  revision  of  these  allowances. 

The  dependents  of  the  soldier,  including  his  immediate  family 
and  relatives,  must  ask  for  the  family  allowance  which  varies 
in  different  provinces  as  well  as  for  the  degree  of  relationship, 
number  and  age  of  dependents.  Private  funds,  administered  by 
government  authorities,  supplement  these  allowances.  In  addi- 
tion, the  government  by  decree  has  required  private  firms  to 
continue,  under  certain  circumstances,  the  salary  or  wages  to 
one  amount,  not  to  exceed  one-half  of  their  employes  who  are 
in  the  service. 

Maternity  allowances  are  also  made  to  the  wage  earning 
women  of  families  of  soldiers. 

The  pension  system  has  been  revised  along  the  lines  of  the 
French  system,  with  a  general  increase  over  the  amounts  pro- 
vided for  in  the  law  of  1895. 

Disability  pensions  on  the  basis  of  prewar  earning  power  and 
the  size  of  the  family  are  allowed,  as  well  as  retirement  pensions 
after  periods  of  service. 


EFFECT   ON   SOCIAL   INSURANCE   AND   PENSIONS  1 73 

Pensions  for  widows  and  other  dependents  of  soldiers  killed 
in  the  service,  or  as  a  result  of  disease  or  injury  contracted  in 
the  service,  are  provided. 

In  Italy  as  well  as  in  most  of  the  European  nations  at  war, 
more  or  less  recognition  has  been  given  in  the  family  allowance 
and  pension  legislation  or  decrees  to  the  claims  of  illegitimate 
children. 

In  the  neutral  nations  of  Europe  the  social  insurance  plans 
have  been  greatly  affected.  As  an  indication  of  the  general 
situation,  brief  reference  may  be  made  to  Switzerland  and  to 
Denmark. 

The  Swiss  Social  Insurance 

Switzerland  had  adopted  and  applied  before  the  war  an  ex- 
tensive system  of  social  insurance.  The  sickness  and  accident 
insurance  system  had  been  adopted  by  a  referendum  in  191 2, 
under  which  the  federated  government  granted  subsidies  to  sick 
insurance  funds.  The  cantons  could  make  such  insurance  com- 
pulsory, or  could  assume  responsibility  for  paying  the  premiums 
of  needy  persons  for  such  insurance.  These  national  subsidies 
amounted  to  about  one-third  of  the  total  disbursements.  The 
benefits  under  the  sickness  insurance  included  daily  indemnities 
for  loss  of  time,  as  well  as  medical  attention. 

Accident  insurance  is  compulsory  for  wage  earners  in  many 
trades,  and  the  risks  insured  against  include  occupational  dis- 
eases, as  well  as  the  ordinary  occupational  and  nonoccupational 
risks.  Each  canton  conducts  this  insurance  on  the  mutual  plan, 
but  the  National  Government  administers  this  fund  and  pays 
one-half  the  expenses  of  administration. 

Various  attempts  have  been  made  in  Switzerland  to  arrange 
military  insurance  with  private  insurance  companies.  With  the 
outbreak  of  the  war,  new  legislation  in  respect  to  military  pen- 
sions was  necessary,  and  in  19 14  a  federal  plan  of  military 
insurance  was  adopted.  Military  service  is  obligatory  on  all 
citizens  between  the  ages  of  20  and  48,  except  in  the  case  of 
certain  persons  who  pay  an  exemption  tax. 


174  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

The  military  insurance  pensions  and  allowances  are  so  related 
to  the  federal  civil  insurance,  that  the  latter  become  suspended 
when  the  person  is  receiving  the  military  insurance,  except  in 
certain  circumstances. 

The  striking  feature  about  the  Swiss  plan  is  the  use  by  the 
government  of  the  insurance  principle  both  for  military  and 
civil  life  risks/ 

The  Danish  Plan 

In  Denmark  social  insurance  is  also  broadly  national,  al- 
though not  altogether  paternal  or  compulsory.  Sickness  and 
nonemployment  are  cared  for  by  voluntary  clubs,  to  which  the 
government  contributes  an  amount  equal  to  that  derived  by  the 
members  from  dues.  Accident  insurance  is  compulsory  on  em- 
ployers. Old-age  pensions  are  a  paternal  dispensation,  the  ex- 
pense being  shared  by  the  national  treasury  and  the  community 
in  which  the  applicant  resides.  Such  pensions  were  given  to 
87,400  persons  in  1916,  as  against  85,700  in  191 5  and  83,600  in 
1914.  On  account  of  the  advance  in  the  cost  of  living,  the  pay- 
ments made  to  the  needy  aged  people  were  larger  during  19 16 
than  in  previous  years.  Disbursements  by  the  state  were 
$3,750,000  in  1914,  $4,000,000  in  1915,  and  $4,500,000  in  1916. 
The  city  of  Copenhagen  houses  17,400  of  the  old  and  feeble. 

The  number  of  widows  with  children  who  received  govern- 
ment assistance  during  1916  was  7,338,  and  16,529  children 
benefited  from  the  distribution.  The  amount  expended  was 
$260,000. 

What  is  most  striking  about  these  figures  is  perhaps  the  very 
high  proportion  borne  by  the  number  of  old-age  pensioners  and 
widows  in  receipt  of  government  allowances  to  the  total  popula- 
tion of  Denmark.  This  population  was  in  191 6  approximately 
2,800,000  persons  of  all  ages.  Of  these,  94,738  were  bene- 
ficiaries of  the  government  old-age  pension  and  widows'  allow- 
ance systems.     The  proportion  of  such  beneficiaries  to  the  total 

^  For  further  details  of  the  systems  of  pensions  and  allowances  in  various 
European  countries  for  dependents  of  soldiers  and  sailors,  see  the  study  of 
Capt.  S.  Herbert  Wolfe,  op.  cit. 


EFFECT    ON    SOCIAL    INSURANCE   AND    PENSIONS  I75 

population,  therefore,  was  over  3.4  per  cent.;  while  if  only  the 
grown-up  population  is  taken  into  consideration  the  proportion 
is  well  above  5  per  cent. 


Summary 

If  an  attempt  is  made  to  summarize  the  effect  of  the  war  on 
social  insurance  and  pensions,  the  following  conclusions  seem 
to  be  warranted : 

First,  the  war  has  had  a  tendency  to  stop  for  the  time  being 
the  normal  scientific  development  and  extension  of  social  insur- 
ance to  meet  the  contingencies  arising  in  times  of  peace  for  the 
large  class  of  wage  earners  in  the  nations  at  war. 

Second,  by  bringing  into  industry  large  numbers  of  women, 
married  and  unmarried,  the  war  has  brought  the  need  for  the 
extension  of  many  kinds  of  social  insurance. 

Third,  by  the  modification  of  existing  social  insurance  legis- 
lation by  extension,  by  decrees  or  otherwise,  an  effort  has  been 
made  to  provide  for  the  increased  dependency  due  to  the  war. 
Pensions  have  been  increased  and  made  to  include  greater  num- 
bers and  additional  contingencies. 

Fourth,  thus,  by  a  recognition  of  the  obligation  of  the  nation 
to  provide  for  needs  arising  from  direct  war  service,  or  indus- 
trial service  in  providing  war  supplies,  the  people  of  the  various 
countries  are  committed  to  a  much  wider  use  of  the  social  insur- 
ance principle.  The  net  result,  therefore,  of  the  war  on  this 
form  of  insurance  is  likely  to  be  an  extension  of  social  insurance. 

More  and  more  a  part  of  the  national  income  and  govern- 
mental activity  will  be,  in  all  probability,  devoted  to  the  further- 
ing of  plans  of  social  insurance.  The  needs  are  so  clear  and 
the  object  lesson  so  striking,  that  the  social  use  of  the  insurance 
principle  will  probably  be  increasingly  demanded. 

The  individualistic  concept  of  sickness,  accident,  maternity, 
military  service,  old  age  and  unemployment  will  be  modified  by 
a  clearer  recognition  of  the  social  responsibility,  and  what  is  a 
collective  responsibility  will  be  provided  for  by  collective  actioa 


IV 


THE  EFFECT  OF  THE  WAR  ON  MARINE 
INSURANCE 

No  other  branch  of  insurance  has  been  so  directly  and  ex- 
tensively affected  by  the  war  as  marine  insurance.  This  was 
due  to  several  facts.  In  the  first  place,  ocean  transportation 
rose  to  a  position  of  even  greater  importance  than  in  times  of 
peace.  Such  large  numbers  of  the  industrial  population  were 
diverted  either  to  the  service  of  the  armies  and  navies,  or  were 
engaged  in  the  production  of  war  supplies,  that  there  was  not 
only  a  decrease  in  the  number  of  producers  of  food  supplies, 
but  also  an  increased  demand  for  certain  kinds  of  foods  and 
munitions  of  war.  These  supplies  had  to  be  brought  from  other 
countries  and  an  unprecedented  demand  arose  for  shipping 
facilities.  In  the  second  place,  blockades  were  established.  On 
the  one  hand,  the  nations  allied  against  the  Central  Powers  at- 
tempted to  prevent  supplies  from  reaching  these  countries  by 
blockading  their  entrance  ports.  On  the  other  hand,  the  Central 
Powers  declared  a  blockade  of  the  ports  of  the  Allied  nations 
and  by  the  use  of  the  submarine  began  to  destroy  vessels  carry- 
ing supplies  to  the  Allied  nations.  These  practices  led  in  some 
cases  to  a  withdrawal  of  vessels  from  these  dangerous  routes 
and  their  diversion  to  other  routes.  In  some  cases,  as  the  use 
of  the  submarine  became  more  effective,  vessels  were  withdrawn 
from  the  carrying  trade.  In  the  third  place,  large  numbers  of 
vessels  belonging  to  citizens  of  the  Central  Powers  were  interned 
at  the  outbreak  of  the  war  in  neutral  ports.  There  was  thus  an 
increased  demand  for  carriers,  a  reduction  in  their  number,  and 
a  very  great  increase  in  the  risk  of  loss  of  vessel  and  cargo. 

Nor  was  the  loss  of  vessels  and  the  increased  hazard  confined 
to  the  nations  actually  engaged  in  the  war.    The  merchant  marine 

176 


EFFECT    ON    MARINE   INSURANCE  I77 

of  such  important  carrying  nations  as  Holland,  Norway,  Sweden 
and  the  United  States,  was  subjected  to  heavy  losses  by  destruc- 
tion of  the  vessels,  the  confiscation  of  their  cargoes,  and  certain 
limitations  on  their  normal  business. 

The  world  war  has  radically  changed  the  risk  of  transporta- 
tion insurance  and  increased  it  materially.  The  regularity  of 
certain  highways,  their  tests  for  wind  current,  shallowness  and 
ice-drifts,  formed  a  material  safeguard  for  sea  navigation.  To- 
day the  ships  are  forced  to  take  entirely  different  routes  from 
those  used  in  times  of  peace;  they  must  pass  through  waters 
which  have  not  been  charted  and  in  which  in  case  of  need  it 
would  be  difficult  for  them  to  secure  help.  To  this  is  added 
the  fact  that  the  sea  patrol  at  this  time  can  be  carried  on  only 
very  limitedly;  many  sea  signals  have  disappeared,  and  the 
majority  of  beacons  have  been  extinguished. 

Mines 

One  of  the  greatest  dangers  of  the  war  for  maritime  insurance 
is  caused  by  mines.  In  the  present  war  the  coasts  of  all  the 
important  countries  of  Europe  are  surrounded  by  mines,  which 
even  after  the  war  will  form  a  serious  danger  to  navigation. 
Even  if  the  war  risk  is  excluded  from  ordinary  transportation 
insurance,  the  underwriter  must  bear  a  great  number  of  total 
losses  which  are  actually  caused  by  mines,  but  with  which  the 
exact  fixing  of  the  cause  of  injury  is  impossible.  Many  a  sunken 
ship,  which  one  may  assume  with  certainty  ran  into  a  mine  with- 
out being  able  to  prove  it,  must  be  completely  compensated  for  by 
the  underwriter.  To  this  must  be  added,  the  guiding  of  vessels 
on  these  imperiled  routes  must  now  be  entrusted  to  a  decreased 
number  of  employes  who  are  not  completely  experienced,  as  the 
war  marine  has  withdrawn  from  the  trade  many  of  the  best 
sailors. 

Upon  the  return  of  vessels  from  a  journey  the  normal  period 
for  repairs  was  lacking.  Most  of  them  had  to  venture  immedi- 
ately upon  the  sea  again.     Under  this  plan  the  vessel  became 


178  EFFECTS   OF   THE    WAR   UPON    INSURANCE 

worn  out.  The  completion  of  new  ships,  through  the  shutting 
down  of  the  majority  of  wharves  which  worked  only  for  the 
navy,  became  extremely  unpretentious.  Besides  this,  it  must 
be  emphasized  that  repeated  and  entirely  unsuitable  cargoes  be- 
came harmful,  even  dangerous,  to  the  ships.  Another  cause  for 
heavy  damage  lies  in  the  extraordinary  expense  for  the  repairs 
of  damaged  parts.  This  refers  to  the  material  as  well  as  to 
wages  for  the  work.  If  in  normal  times  repairs  in  America  had 
been  very  expensive,  then  at  the  present  the  damage  by  sea  which 
must  be  repaired  in  America  is  extremely  expensive.  Damage, 
which  in  normal  times  could  be  estimated  at  10  per  cent,  must 
today  be  estimated  at  at  least  25  to  30  per  cent. 

Blockades 

A  new  war  chapter  of  the  transportation  insurance  began 
February  18,  19 15,  with  the  German  blockade  of  England.  Im- 
mediately after  the  war  broke  out,  the  conflict  was  carried  over 
to  the  economic  field,  but  in  the  trade  war  the  consideration  for 
international  rights  was  soon  put  in  the  background.  The 
London  maritime  law  declaration  was  infringed  by  a  large  num- 
ber of  articles  being  placed  on  the  list  of  contraband  which  were 
not  to  be  used  or  had  very  little  use  in  war.  A  distinction 
between  absolute  and  relative  contraband  was  not  made.  The 
Parisian  maritime  law  declaration  was  infringed  through  con- 
tinued capture  of  private  property  from  neutral  vessels  which 
was  not  war  contraband.  While  the  whole  North  Sea  was  de- 
clared a  seat  of  war,  a  blockade  of  neutral  harbors  and  neutral 
coasts  was  declared.  The  affected  neutral  countries  had  to 
accommodate  themselves  to  the  circumstances;  especially  did  they 
object  to  the  fact  that  Germans  captured  on  neutral  vessels  must 
be  delivered  to  the  English  Government.  Neutral  flags  were 
also  supposed  to  have  been  misused  by  the  nations  at  war.  The 
following  notice  was  given  by  Germany  to  foreigners,  neutrals 
and  enemies  February  4,  1915:  (i)  The  waters  about  Great 
Britain  and  Ireland  are  herewith  declared  a  war  zone.     From 


EFFECT   ON    MARINE    INSURANCE  I79 

February  i8,  1915,  every  enemy  trade  vessel  met  in  this  terri- 
tory will  be  destroyed  without  always  warning  the  passengers. 
(2)  Also  neutral  ships  will  run  in  danger  as  the  British  Govern- 
ment has  misused  neutral  flags,  and  it  is  impossible  to  avoid  the 
attacks  on  neutral  ships,  which  are  intended  for  enemy  ships. 

Naturally  the  sea  trade  with  Holland  was  materially  decreased 
through  this  blockade,  even  though  a  strip  of  at  least  thirty  miles 
broad  along  the  Dutch  coast  was  not  declared  endangered.  This 
German  submarine  warfare  was  followed  March  11,  1915,  by 
the  English  Order  in  Council,  which  declared  liable  to  capture 
all  goods  to  or  from  Germany  and  all  goods  to  and  from  neutral 
countries  if  they  were  German  goods  or  had  German  origin. 
This  caused  a  further  increase  of  war  insurance  premium.  These 
did  not  yet  indicate  the  high  point.  To  these  was  added  the 
German  declaration  of  January  31,  191 7,  which  declared  the 
waters  around  Great  Britain,  France,  Italy,  and  the  eastern 
Mediterranean  countries  as  blockaded,  in  which  all  sea  travel 
would  be  opposed  by  guns.  For  the  neutrals,  certain  defined 
territories  have  been  left  open  under  definitely  restricted  guar- 
antees. Through  this  increased  submarine  warfare,  the  war  was 
directed  not  only  against  the  enemies  in  arms,  but  against  the 
entire  population  of  the  enemy  countries. 

To  these  increased  war  dangers  old  dangers  are  added  in 
increased  numbers :  fire  on  board  of  ships,  risk  of  theft  and  store- 
house risks.  In  these  abnormal  times,  when  goods  lie  about 
outside  for  months,  the  danger  of  theft  increases.  It  is  asserted 
that  of  every  shipment  some  has  been  stolen.  In  the  European 
harbors  during  the  war  years  fire  has  broken  out  more  than  once, 
and  the  conflagrations  have  always  caused  enormous  damages. 
It  has  even  occurred  that  the  punishment  of  thefts  has  been 
prevented  through  assistants  setting  the  place  afire.  The  ex- 
traordinary conditions  of  navigation  called  forth  by  the  war  also 
helped  to  increase  the  damage,  but  still,  in  spite  of  this,  different 
companies  have  secured  good  results  from  the  transportation 
insurance. 

The  brief  description  which  has  preceded  makes  apparent  in 


l80  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

what  a  serious  manner  the  hazards  in  marine  insurance  had 
increased.  Thus  one  of  the  earhest  forms  of  insurance  trans- 
acted and  one  with  all  the  accompanying  scientific  developments 
of  centuries  was  thrown  into  a  chaotic  state  by  the  war.  Un- 
known hazards  had  been  introduced.  Private  companies  had  no 
bases  upon  which  to  establish  rates  for  certain  voyages.  In  many 
cases  marine  insurance  became  a  speculation.  Vessels  may  as 
well  have  begun  a  voyage  to  unknown  seas,  so  far  as  the  com- 
panies' having  any  accurate  data  upon  which  to  base  marine 
insurance  premiums  was  concerned.  There  soon  came  to  be, 
under  these  circumstances,  a  dearth  of  marine  insurance.  The 
situation  was  made  even  more  serious  by  the  fact  that  two  of 
the  leading  combatants — England  and  Germany — w^re  the  na- 
tions in  which  a  very  large  amount  of  marine  insurance  had  been 
written.  The  private  companies  of  these  nations,  especially  of 
England,  had  been  very  aggressive  in  developing  marine  insur- 
ance, and  at  the  outbreak  of  the  war  held  marine  insurance  on 
vessels  plying  between  all  the  leading  parts  of  the  world  and 
owned  by  the  citizens  of  many  different  nations.  It  was  ap- 
parent that  private  marine  insurance  companies  could  not  under- 
take the  insuring  of  many  vessels  exposed  to  these  new  hazards. 
The  risks  as  a  whole  w^ould  have  been  prohibitive  for  such  com- 
panies, strong  as  the  financial  position  of  many  of  them  was. 

Public  Aid  and  Insurance 

The  solution  of  the  problem  was  found  either  in  direct  gov- 
ernment insurance  or  in  arrangements  with  the  private  com- 
panies under  which  the  state  agreed  to  act  as  reinsurers  or  to 
carry  that  portion  of  the  risk  represented  by  the  war  hazards. 
In  discussing  the  various  plans  adopted  it  will  be  necessary  to 
refer  to  the  Central  Powers  only  in  a  general  way,  inasmuch 
as  their  merchant  marines  are  practically  off  the  seas,  interned 
in  neutral  ports  or  kept  in  the  home  ports. 


EFFECT   ON    MARINE   INSURANCE  l8l 

In  England 

The  plan  which  was  adopted  in  England  has  some  interesting 
features.  It  was  the  result  of  the  careful  investigation  of  a 
committee,  and  was  ready  for  adoption  almost  at  the  outbreak 
of  the  war.  This  was  a  very  important  consideration  in  view 
of  the  fact  that  the  merchant  marine  of  Great  Britain  was  not 
only  very  large,  but  its  continuous  operation  was  also  absolutely 
necessary  for  the  prosecution  of  the  war. 

This  plan  has  had  such  important  results  in  the  war  that  the 
original  agreement  and  the  two  leading  supplementary  agree- 
ments are  given  in  full. 

Reinsurance  Agreement  Between  the  Liverpool  and  London  War  Risks 
Insurance  Association  Limited  (Hereinafter  Called  the  Association) 
of  the  One  Part  and  His  Majesty's  Government  of  the  Other  Part. 

Whereas,  the  Association  is  in  the  habit  of  insuring  the  ships  belonging 
to  its  members  and  entered  in  the  Association  against  war  risks  but  would, 
but  for  the  promise  of  reinsurance  given  by  these  presents,  insure  such  ships 
against  the  risks  of  King's  enemies  in  the  event  of  war  by  or  against  Great 
Britain  for  a  very  limited  period  only, 

And  Whereas,  His  Majesty's  Government  is  desirous  on  grounds  of  public 
safety,  that  while  Great  Britain  is  at  war  British  vessels  shall  not  be  laid 
up  or  oversea  commerce  interrupted, 

And  Whereas,  the  Association  has,  at  the  request  of  His  Majesty's  Gov- 
ernment, extended  or  agreed  to  extend  the  insurance  against  the  risks  of 
King's  enemies,  of  the  ships  belonging  to  its  members  and  entered  in  the 
Association,  upon  the  terms  that  His  Majesty's  Government  undertakes  to 
reinsure  the  Association  as  and  to  the  hereinafter  provided. 

Now,  Therefore,  it  is  hereby  agreed  between  the  parties  as  follows : 

I.  (i)  In  order  that  the  insurance  by  the  Association  of  the  ships  belong- 
ing to  its  members  may  be  extended  so  as  to  cover  the  risks  of  King's 
enemies  in  the  event  of  war  by  or  against  Great  Britain  for  the  period  men- 
tioned in  the  policy  set  out  in  Schedule  I,  His  Majesty's  Government  agrees 
to  insure  as  reinsurers  of  the  Association,  in  the  terms  of  the  policy  set  oiit 
in  Schedule  H,  all  the  ships  insured  by  the  Association,  and  such  insurance 
by  His  Majesty's  Government  shall  be  granted  without  premium  in  consid- 
eration of  the  Association  as  original  insurer,  insuring  the  ships  against 
the  like  risks,  and  shall  cover  80  per  cent  of  the  liability  of  the  Association 
as  original  insurers. 

(2)  The  original  insurance  by  the  Association  mentioned  in  this  clause 
shall  be  in  the  terms  of  the  policy  set  out  in  Schedule  I,  with  such  modifi- 
cations increasing,  but  not  diminishing,  the  protection  given  by  the  Associa- 


1 82  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

tion  as  the  Association  may  think  fit,  provided,  nevertheless,  that  the  liability 
of  His  Majesty's  Government  shall  not  extend  beyond  that  which  would 
attach  under  a  reinsurance  in  the  terms  of  the  policy  set  out  in  Schedule  11 
of  an  original  insurance  in  the  terms  of  the  policy  set  out  in  Schedule  I. 

2.  (i)  In  order  to  promote,  the  insurance  by  the  Association  of  the  ships 
belonging  to  its  members  of  new  voyages  to  be  made  after  war  has  been 
declared  or  hostilities  have  been  begun  by  or  against  the  King's  enemies, 
His  Majesty's  Government  further  agrees  to  insure,  as  reinsurers  of  the 
Association,  in  the  terms  of  the  policy  set  out  in  Schedule  IV,  any  of  the 
ships  belonging  to  the  members  of  the  Association  and  insurance  by  the  Asso- 
ciation for  voyages  begun  after  the  time  when  war  is  declared  or  hos- 
tiHties  are  begun  by  or  against  Great  Britain,  and  such  insurance  by  His 
Majesty's  Government  shall  be  at  such  rates  of  premium  not  exceeding  5 
per  cent,  as  may  from  time  to  time  be  fixed  by  His  Majesty's  Government 
and  shall  cover  80  per  cent  of  the  liability  of  the  Association  as  original 
insurers.  Provided  that  the  Association  shall  be  at  liberty  to  reinsure  else- 
where if  it  so  chooses.  •■ 

(2)  The  original  insurance  by  the  Association  mentioned  in  this  clause 
shall  be  in  the  terms  of  the  policy  set  out  in  Schedule  III,  with  such  modi- 
fications increasing,  but  not  diminishing,  the  protection  given  by  the  Asso- 
ciation as  the^  Association  may  think  fit,  provided  nevertheless,  that  the 
liability  of  His  Majesty's  Government  shall  not  extend  beyond  that  which 
would  attach  under  the  reinsurances  in  the  terms  of  the  policy  set  out  in 
Schedule  IV  of  an  original  insurance  in  the  terms  of  the  policy  set  out  in 
Schedule  III. 

(3)  In  order  to  enable  the  Association  to  fix  the  premium  to  be  charged 
by  it  on  the  original  insurance  in  respect  of  such  voyage.  His  Majesty's 
Government  shall  give  notice  in  writing  to  the  Association  of  the  rates  of 
premiums  charged  by  His  Majesty's  Government  upon  the  reinsurances  and 
of  any  changes  in  the  rates,  and  ships  insured  by  the  Association  shall 
be  reinsured  by  His  Majesty's  Government  at  the  rate  which  was  applicable 
to  the  voyage  according  to  the  notice  received  by  the  Association  at  the  time 
when  the  contract  for  the  original  insurance  by  the  Association  was  con- 
cluded. 

Provided,  that  if  the  ship  insured  did  not  sail  within  fourteen  days  from 
the  time  when  the  original  insurance  is  concluded.  His  Majesty's  Govern- 
ment shall  be  bound  to  reinsure  only  at  the  rate  applicable  to  the  voyage  at 
the  time  when  the  ship  actually  sails. 

The  Association  agrees  that  it  will  not  charge  its  members  an  initial  pre- 
mium at  a  higher  rate  than  the  rate  charged  by  His  Majesty's  Government 
and  that  any  excess  of  losses  over  premiums  shall,  as  between  the  Associa- 
tion and  its  members,  be  made  good  by  a  call  upon  the  members  as  may  be 
provided  by  the  Articles  of  Association  of  the  Association. 

(4)  His  Majesty's  Government  may  give  notice  in  writing  to  the  Associa- 
tion of  any  voyage  for  which  His  Majesty's  Government  is  not  prepared  to 
insure  and  shall  not  be  bound  to  insure  for  any  such  voyage,  any  ship  in  re- 
spect for  which  the  contract  for  the  original  insurance  by  the  Association  was 


EFFECT   ON    MARINE   INSURANCE  183 

concluded  after  the  receipt  by  the  Association  of  the  notice  applicable  to 
such  voyage. 

(5)  Notwithstanding  anything  contained  in  paragraph  (4)  of  this  clause, 
His  Majesty's  Government  shall  be  bound  to  insure  any  ship  for  voyage  to 
a  British  port  from  a  neutral  port  at  which  the  ship,  being  on  a  voyage  or 
in  port  at  that  time  when  war  is  declared  or  hostilities  are  begun  by  or 
against  Great  Britain,  ceases  to  be  covered  by  a  policy  in  the  terms  of  the 
policy  set  out  in  Schedule  II. 

3.  His  Majesty's  Government  shall  accept  for  the  purposes  of  all  rein- 
surances the  values  agreed  between  the  Association  and  its  members  on  the 
original  insurance. 

4.  The  Association  shall  keep  His  Majesty's  Government  advised  of  the 
original  insurance  in  respect  of  which  His  Majesty's  Government  is  bound 
to  reinsure  the  Association  and  His  Majesty's  Government  shall  as  requested 
issue  insurance  policies  accordingly. 

5.  His  Majesty's  Government  may  appoint  two  representatives  who  shall 
be  entitled  to  attend  the  meetings  of  the  Committee  of  the  Association. 

6.  The  Association  shall  permit  the  representatives  of  His  Majesty's  Gov- 
ernment at  all  convenient  times  to  examine  the  books  and  documents  of  or 
in  the  possession  of  the  Association  relating  to  the  original  insurance  and 
any  loss  or  claims  thereunder,  and  shall  also  give  all  the  information  in  the 
possession  of  the  Association  relating  thereto  and  so  far  as  lies  in  its  power 
produce  or  procure  the  production  of  all  books  or  documents  which  the 
Association  is  entitled  to  have  production  of  in  connection  with  the  original 
insurance  and  any  losses  and  claims  thereunder  for  the  examination  by  such 
representatives  of  His  Majesty's  Government. 

7.  All  settlements,  decisions  of  the  Committee  of  the  Association,  unless 
dissented  from  in  writing  by  the  representatives  of  His  Majesty's  Govern- 
ment on  any  of  the  following  matters,  shall  be  accepted  by  His  Majesty's 
Government  as  binding  and  conclusive,  and  His  Majesty's  Government  agrees 
to  follow  and  be  bound  by  the  same,  namely : 

(a)  The  settlement  of  loss  and  claim  attaching  to  any  policy  underwritten 
by  the  Association. 

(b)  The  decision  upon  all  questions  of  cancelation  and  return  of  premium 
and  upon  all  questions  of  average  deposits  and  other  deposits  or  contribu- 
tions and  upon  all  questions  of  salvage  and  refund  and  generally  upon  all 
matters  appertaining  or  incidental  to  the  insurance. 

8.  His  Majesty's  Government  shall  bear  and  pay  its  ratable  proportion  on 
any  expenses  incurred  by  the  Association  in  connection  with  its  loss  or 
claim. 

9.  As  between  His  Majesty's  Government  and  the  Association  all  money 
payable  to  the  Association  in  respect  of  loss,  claims,  deposits,  expenses  or 
otherwise  shall  be  debited  in  account  and  all  money  payable  to  the  Association 
in  respect  of  premiums,  salvages  or  otherwise  shall  be  credited  in  account,  but 
if  at  any  time  the  amount  due  on  balance  to  the  Association  exceeds  £20,000, 
the  excess  shall  be  paid  by  His  Majesty's  Government  to  the  Association 
within  seven  days  of  a  request  for  payment  by  the  Association. 


184  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

10.  The  accounts  between  His  Majesty's  Government  and  the  Association 
shall  be  rendered  quarterly  by  the  Association  to  His  Majesty's  Government 
within  three  months  after  the  close  of  each  quarter  and  the  balance  due  on 
either  side  shall  be  paid  within  seven  days. 

11.  This  agreement  may  be  determined  by  six  months'  notice  in  writing 
on  either  side,  but  notwithstanding  the  expiration  of  such  notice,  His  Maj- 
esty's Government  shall  continue  to  be  bound  to  reinsure  the  Association  in 
respect  of  all  insurance  by  the  Association  for  which  the  contract  was  con- 
cluded before  such  expiration. 

Dated  the  fourth  day  of  August,  1914. 

In  Witness  Whereof  the  Liverpool  and  London  War  Risks  Insurance  Asso- 
ciation Limited  hath  hereunto  caused  its  common  seal  to  be  affixed,  and  the 
President  of  the  Board  of  Trade  for  and  on  behalf  of  His  Majesty's  Gov- 
ernment hath  hereunto  set  his  hand  and  the  seal  of  the  Board  of  Trade. 

The  common  seal  of  the  Liverpool  and  London  War  Risks  Insurance 
Association  Limited  was  hereunto  affixed  in  the  presence  of 

A  A   Booth     \  -^^*«^^^-y    of    the    Committee.  SEAL. 

Normal  Hill,  Secretary. 

Signed  by  the  Right  Honorable  Walter  Runciman,  '\ 

^i  I-'  ^'■"i?!"*  ^^    K ^  ^^^i"^  ""L  ^?i^'  ?^  f  ^'  r  Walter  Runciman. 
of  the  Board  havmg  been  duly  affixed  by  direction  I 

in  the  presence  of  •' 

R.  J.  Lister,  Librarian  Board  of  Trade, 

7  Whitehall  Gardens.  seal. 

Supplemental  Agreement  Between  the  Liverpool  and  London  War  Risks 
Insurance  Association  Limited  of  the  One  Part  and  His  Majesty's  Gov- 
ernment of  the  Other  Part. 

Whereas,  this  Agreement  is  supplemental  to  an  Agreement  dated  the  fourth 
day  of  August,  1914,  and  made  between  the  parties  hereto  (herein  called 
"the  principal  Agreement"),  and  whereas  by  the  principal  Agreement  it  is 
provided  that  His  Majesty's  Government  shall  insure,  as  reinsurers  of  the 
Association,  in  the  terms  of  the  policy  set  out  in  Schedule  IV  to  the  prin- 
cipal Agreement  any  of  the  ships  belonging  to  members  of  the  Association 
and  insured  by  the  Association  in  the  terms  of  the  policy  set  out  in  Schedule 
III  to  the  principal  Agreement  for  voyages  begun  after  the  time  when  war 
is  declared  or  hostilities  are  begun  by  or  against  Great  Britain,  and  whereas 
it  has  been  agreed  between  the  parties  that  such  insurance  by  His  Majesty's 
Government  shall  not  be  limited  to  voyage  policies  but  shall,  at  the  option 
of  the  Association,  be  for  time  as  hereinafter  provided,  and  that  the  prin- 
cipal Agreement  between  the  parties  shall  be  otherwise  modified  as  herein- 
after provided. 
Now,  Therefore,  it  is  agreed  between  the  parties  as  follows : 
I.  His  Majesty's  Government  agrees  to  insure,  as  reinsurers  of  the  Asso- 
ciation in  the  terms  of  the  policy  set  out  in  the  Schedule  hereto  marked  VI 
any  of  the  ships  belonging  to  members  of  the  Association  and  insured  by 
the  Association  for  time  beginning  after  the  time  when  war  is  declared  or 


EFFECT    ON    MARINE    INSURANCE  185 

hostilities  are  begun  by  or  against  Great  Britain,  and  such  insurances  and 
at  such  rates  of  premium  as  may  from  time  to  time  be  fixed  by  His  Maj- 
esty's Government  and  shall  cover  80  per  cent  of  the  liability  of  the  Associa- 
tion as  original  insurers. 

2.  The  original  insurances  for  time  by  the  Association  mentioned  in  the 
preceding  clause  shall  be  in  the  terms  of  the  policy  set  out  in  Schedule 
hereto  marked  V  with  such  modifications  increasing  but  not  diminishing  the 
protection  given  by  the  Association  as  the  Association  may  think  fit  provided 
nevertheless  that  the  liability  of  His  Majesty's  Government  shall  not  extend 
beyond  that  which  would  attach  under  a  reinsurance  in  the  terms  of  the 
policy  set  out  in  Schedule  VI  of  an  original  insurance  in  the  terms  of  the 
policy  set  out  in  Schedule  V. 

3.  The  Association  shall  not  charge  its  members  an  initial  premium  at  a 
higher  rate  than  the  rate  charged  by  His  Majesty's  Government  and  any 
excess  of  losses  over  premiums  shall,  as  between  the  Association  and  its 
members,  be  made  good  by  a  call  upon  the  members  as  may  be  provided  by 
the  Articles  of  Association  or  Rules  of  the  Association. 

4.  Clauses  4  to  11  inclusive  and  also  (subject  to  clause  5  hereof)  clause 
3  of  the  principal  Agreement  shall  be  treated  as  forming  part  of  this 
Agreement. 

5.  For  the  purposes  of  insurance  and  reinsurance  under  the  principal 
Agreement  and  this  Agreement  the  ships  insured  shall  as  from  midnight  on 
the  9th  day  of  September,  1914,  be  valued  on  the  following  basis,  namely,  a 
sum  not  exceeding  the  first  cost  of  the  vessel,  without  allowance  for  the 
cost  of  alterations  or  additions,  less  depreciation  at  the  rate  of  4  per  cent 
per  annum,  with  a  minimum  value  of  thirty  shillings  per  ton  gross  register 
tonnage. 

Provided  always  that  nothing  in  this  clause  contained  shall  operate  to  alter 
the  valuation, 

(a)  in  any  insurance  under  this  or  the  principal  Agreement  in  respect  of 
any  loss  happening  before  midnight  on  the  9th  day  of  September,  1914; 
or  (b)  in  any  insurance  upon  the  terms  of  the  forms  of  Schedules  HI  and 
IV  hereinbefore  referred  to  which  is  effected  before  midnight  on  the  9th 
day  of  September,  1914 ; 

or  (c)  in  any  insurance  upon  the  terms  of  the  forms  of  Schedules  V  and 
VI  hereinbefore  referred  to,  which  is  effected  before  midnight  on  the  9th 
day  of  September,  1914,  for  time  beginning  before  the  loth  day  of  Septem- 
ber, 1914. 

6.  The  terms  of  any  of  the  policies  referred  to  in  the  principal  Agree- 
ment and  this  Agreement  may  from  time  to  time  be  varied  as  may  be  agreed 
between  the  Board  of  Trade  and.  the  Association. 

Supplemental  Agreement  Between  the  Liverpool  and  London  War  Risks 
Insurance  Association  Limited  {Hereinafter  Called  the  Association) 
of  the  One  Part  and  His  Majesty's  Government  of  the  Other  Part. 

Whereas,  the  parties  hereto  have  already  entered  into  two  Agreements  in 
the  terms  of  the  two  documents  hereto  annexed  marked  "  A "  and  "  B " 


l86  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

(hereinafter  called  the  principal  Agreements)  for  the  reinsurance  by  His 
Majesty's  Government  of  ships  belonging  to  members  of  the  Association  and 
insured  by  the  Association,  and  whereas  the  parties  hereto  are  desirous  of 
making  some  provision  for  the  dependents  of  the  seamen  employed  on  such 
ships  in  the  event  of  capture  or  detention  by  the  King's  enemies, '' 
Now,  Therefore,  it  is  hereby  agreed  between  the  parties  hereto  as  follows : 

1.  In  this  Agreement — 

"  Insured  ship  "  means  a  ship  insured  by  the  Association  and  reinsured  by 
His  Majesty's  Government  and  a  ship  shall  be  deemed  to  have  been  an  insured 
ship  during  the  whole  of  the  period  covered  by  such  insurance  and  reinsur- 
ance whenever  actually  effected. 

"  Seamen  "  shall  have  the  meaning  assigned  thereto  in  the  Merchant  Ship- 
ping Act,  1894,  except  that  the  same  shall  also  include  a  master  as  defined 
by  such  act. 

"  Dependents  "  shall  have  the  meaning  assigned  thereto  in  the  Workman's 
Compensation  Act,  1906,  substituting  "  seaman  "  for  "  workman." 

2.  In  the  event  of  the  detention  or  capture  by  the  King's  enemies  of  any 
ship  which  then  is  or  subsequently  becomes  an  insured  ship  within  the  mean- 
ing of  this  Agreement,  the  Association  shall  pay  or  refund  to  the  member 
owning  such  ship  the  payment  of  the  following  allowance  to  or  for  the 
benefit  of  the  dependent  or  dependents  (if  any)  of  any  seaman  employed  or 
engaged  on  board  of  such  ship  at  the  time  of  such  capture  or  detention  or 
some  or  one  of  such  dependents,  namely,  an  allowance  equal  to  half  the 
wages  of  such  seaman  or  £1  per  week  whichever  shall  be  less,  but  so  that 
only  one  such  allowance  shall  be  payable  to  or  for  the  benefit  of  the  depend- 
ents of  such  seaman  (if  more  than  one).  Provided  always  that  if  and  so 
long  as  any  part  of  such  seaman's  wages  are  being  paid  under  any  allot- 
ment note  or  notes,  the  amount  so  paid  shall  be  debited  against  such 
allowances. 

2.  A.  The  Committee  may,  if  they  in  their  absolute  discretion  think  fit, 
treat  any  ship  which,  owing  to  hostilities,  is  unable  to  leave  a  neutral  or 
friendly  belligerent  port  in  the  Baltic  or  any  port  in  the  opinion  of  the  Com- 
mittee similarly  affected  by  hostilities  as  in  the  same  position  as  if  it  were 
detained  by  the  King's  enemies  and  may  pay  or  refund  the  payment  of 
allowances  to  the  dependents  of  the  seamen  employed  or  engaged  on  such 
ship  accordingly. 

Provided  always  that  this  clause  shall  not  apply  to  any  ship  detained  in  a 
port  other  than  a  Baltic  port  without  the  consent  of  the  representatives  of 
His  Majesty's  Government  on  the  Committee. 

3.  The  allowance  paid  under  this  Agreement  shall  be  paid  and  borne  in 
the  same  manner  as  if  the  same  had  been  losses  covered  by  the  policies  of 
insurance  and  reinsurance  relating  to  the  ships  in  question  and  shall  accord- 
ingly be  borne  by  the  fund  produced  by  the  premiums  paid  on  the  Associa- 
tion's policies  of  insurance  against  King's  enemies  risks  and  if  and  so  far 
as  such  fund  is  insufficient  to  meet  the  same  after  providing  for  the  other 
payments  thereon,  the  deficiency  shall  be  borne  as  to  80  per  cent  by  His 
Majesty's  Government  and  as  to  20  per  cent  by  the  Association. 


EFFECT   ON    MARINE   INSURANCE  187 

4.  An  allowance  payable  to  the  dependents  of  a  seaman  under  this  Agree- 
ment shall  continue  so  long  as  such  seaman  shall  in  the  opinion  of  the  Com- 
mittee have  been  actually  prevented  from  providing  for  his  dependents  by 
reason  of  the  capture  or  detention  of  the  ship  on  which  he  was  employed 
or  engaged. 

5.  It  shall  rest  with  the  Committee  of  the  Association  to  determine  who 
is  or  who  are  the  dependent  or  dependents  of  any  seaman  entitled  to  the 
benefit  of  any  allowance  made  under  this  Agreement,  and  if  more  than  one, 
in  what  shares  and  proportions,  and  in  the  case  of  any  infant  dependent 
to  whom  the  same  is  to  be  paid  and  how  long  any  such  allowance  is  to 
continue. 

6.  This  Agreement  shall  determine: 

(A)  On  the  determination  of  the  principal  Agreements,  or 

(B)  On  the  expiration  of  three  months'  notice  in  writing  by  either  party 
determining  this  Agreement  whichever  shall  first  happen. 

7.  This  Agreement  is  conditional  on  the  Association  obtaining  the  neces- 
sary powers  to  carry  it  into  effect  either  by  alteration  of  its  Memorandum 
of  Association  in  accordance  with  Section  9  of  the  Companies  (Consolida- 
tion) Act,  1908,  or  by  special  provision  in  the  Act  of  Parliament  to  be  passed 
for  sanction  of  the  Government  War  Risks  Reinsurance  Scheme.  When  this 
condition  has  been  fulfilled  this  Agreement  shall  operate  retrospectively  as 
from  noon  on  the  4th  August,  1914,  or  any  earlier  commencement  of  hos- 
tilities by  or  against  the  King's  enemies. 

Features  of  the  Plan 

Attention  may  be  directed  to  some  of  the  more  important 
features  of  these  agreements : 

In  the  first  place,  it  will  be  observed  that  it  did  not  directly 
provide  for  public  insurance  under  an  organization  of  the  govern- 
ment, but  used  the  existing  private  organizations  to  accomplish 
the  end,  thus  obviating  the  complex  and  difficult  problems  con- 
nected with  establishing  a  new  bureau  or  department  of  the  gov- 
ernment. The  marine  insurance  business  in  England  has  long 
existed  and  afforded  a  splendid  organization  to  carry  on  the 
details  of  the  work.  In  the  United  States,  as  will  be  later 
described,  a  separate  department  of  government  was  organized 
to  transact  the  war  risk  insurance.  The  difference  in  method  of 
procedure  was  due  in  part  to  the  different  character  of  the  two 
governments  and  their  methods  of  procedure,  and  in  part  to  the 
different  status  of  marine  insurance.  In  the  United  States 
marine  insurance  had  not  developed  as  it  had  in  England. 


l88  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

In  the  second  place,  the  agreement  concerned  itself  chiefly 
with  reinsurance,  although  later  the  insurance  of  men  engaged 
in  the  British  Merchant  Marine  was  provided. 

In  the  third  place,  the  closest  cooperation  between  the  gov- 
ernment and  the  private  organization  is  provided  for  through 
representation  by  the  government  in  the  private  organizations, 
and  detailed  reports  of  these  private  associations  to  the  gov- 
ernment. 

In  the  fourth  place,  the  seamen  and  their  dependents  are  given 
protection  by  the  simple  method  of  providing  that  the  Work- 
man's Compensation  Act  shall  apply  to  them,  the  government 
assuming  the  status  of  an  employer. 

In  the  Appendix,  the  more  important  forms  of  policies  which 
were  written  under  the  terms  of  these  agreements  are  given. 

There  have  been  minor  modifications  of  the  preceding  plan, 
but  under  it  the  British  Merchant  Marine  has  been  operating 
and  rendering  to  the  Allied  nations  the  absolutely  necessary 
service  of  carrying  food  and  war  supplies,  which  Great  Britain, 
more  than  any  other  nation,  was  in  a  position  to  do. 

The  plan  was  not  devised  or  operated  to  make  money.  It  was 
a  very  simple  plan  and  the  basis  of  it  was  a  flat  rate  for  all 
steamers  and  all  voyages.  The  committee  which  had  charge 
of  its  operation  was  empowered  to  vary  rates  from  time  to  time. 
Limits  were  fixed  beyond  which  rates  could  not  rise.  These 
limits  were  fixed  both  for  hull  and  cargoes,  and  for  voyages  the 
upper  limit  was  at  first  five  guineas  on  the  hundred  and  the  lower 
limit  one  guinea  on  the  hundred.  The  plan  from  one  viewpoint 
was  not  logical,  but  it  had  the  great  merit  of  simplicity.  The 
private  companies  competed  with  the  state  under  this  agreement, 
and,  as  will  later  be  shown,  the  private  companies  have  enjoyed 
unusual  prosperity.  Under  this  competition  the  good  risks  which 
were  worth  less  than  the  rates  established  under  the  government 
plan  went  to  the  private  companies,  and  the  poor  risks  were 
taken  by  the  government.  In  general,  the  amount  of  the  business 
transacted  under  the  government  plan  has  been  in  proportion  to 
the  activity  of  the  submarines.     When  the  Appam  and  Emden 


EFFECT   ON    MARINE   INSURANCE  189 

were  at  sea  raiding  shipping  the  state  secured  practically  all 
the  business.  As  one  writer  expresses  the  situation,  "  the  dice 
were  always  loaded  against  the  state;  but  the  scheme  was  not 
designed  to  make  money.  It  was  intended  to  help  a  lame  dog 
over  a  stile."  Doubtless  many  of  the  sponsors  thought  either 
the  "  dog "  would  rapidly  improve  or  the  •"  stile "  would  be 
destroyed,  but,  as  later  events  have  shown,  the  submarine  con- 
tinued its  destructive  work  and  the  construction  of  new  vessels 
has  hardly  proceeded  at  a  rate  equal  to  the  rate  of  destruction. 

Results  of  the  Plan 

Accurate  statistics  as  to  the  number  of  vessels  sunk  and  the 
losses,  including  cargo,  are  impossible  to  obtain.  From  time  to 
time,  both  from  the  Allied  nations  and  the  Central  Powers,  such 
statistics  have  been  offered,  but  there  is  such  discrepancy  in 
them  that  the  public  will  be  compelled  to  await  the  close  of  the 
war  to  learn  what  losses  to  the  shipping  of  the  world  have  been 
entailed  by  the  submarine,  mines  and  other  destructive  agencies 
used  against  the  merchant  marines  of  the  nations  at  war  and 
the  neutrals. 

Private  Marine  Companies 

However,  there  are  available  some  statistics  in  reference  to 
the  business  transacted  by  the  private  companies  and  the  results 
secured. 

Much  difficulty  exists  in  drawing  a  hard  and  fast  line  between  what  before 
the  war  was  regarded  as  war  risk  insurance  and  marine  insurance.  Before 
the  war  most  underwriters  probably  regarded  the  war  risk  to  shipping  as 
being  the  risk  of  capture,  or  possibly  of  the  sinking,  of  a  number  of  mer- 
chant ships  by  German  cruisers,  such  as  actually  happened  in  the  first  few 
months  of  the  war.  The  main  risk  has  proved  to  be  the  sinking  of  shipping,, 
both  British  and  neutral,  on  a  large  scale  by  submarines ;  and  also  the 
destruction  of  merchant  vessels  by  indiscriminate  mine  laying.  But,  apart 
from  these  closely  defined  risks,  the  war  has  affected  the  safety  of  shipping 
in  many  different  ways.  It  would  have  been  quite  impossible  for  any  under- 
writer, however  much  he  might  have  wished  to  do  so,  to  dissociate  himself 
from  its  effects. 


190  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

Thus  navigation  is  prejudiced  during  the  war  by  the  suppression  of  lights; 
vessels  are  employed  in  trades  for  which  they  were  not  devised ;  repairs, 
owing  to  the  pressing  need,  have  been  deferred ;  values  have  risen  enor- 
mously, and  in  many  other  ways  the  war  has  made  itself  felt.  How  closely 
war  risks  and  marine  risks  merge  into  each  other  has  been  shown  when 
vessels  became  seriously  overdue,  and  circumstantial  evidence  had  to  be 
taken  before  a  decision  could  be  reached  as  to  whether  the  vessels  had  been 
lost  through  ordinary  marine  perils  or  had  been  sunk  by  the  enemy. 

Until  the  last  quarter  of  the  first  year  losses  due  to  what  were  consid- 
ered marine  perils  were  not  unusually  heavy.  Then  came  a  number  of 
disasters  affecting  both  liners  and  tramp  vessels,  which  are  likely  to  have 
affected  unfavorably  many  marine  underwriting  accounts. 

Although  a  very  large  business  was  transacted  under  the  British  Govern- 
ment's scheme  of  insurance,  there  was  still  an  immense  amount  of  war  risk 
insurance  to  be  placed  in  the  open  market  in  respect  of  both  hulls  and  cargo. 
Insurances  on  neutral  vessels  and  their  cargo  had  to  be  placed  with  under- 
writers, and  the  services  of  the  insurance  market  in  assisting  th^  commerce 
of  the  country  have  been  very  great.  At  times,  while  ordinary  marine  rates 
did  not  change,  war  risk  premiums  were  on  a  very  high  level,  and  it  was 
to  be  expected  that  the  reports  of  the  companies  would  show  very  large 
increases  in  premium  incomes. 

Depletions  of  staffs  have  made  business  more  difficult  to  carry  through, 
and  early  in  the  year  a  scheme  was  inaugurated  for  the  signing  of  the 
policies  of  Lloyd's  underwriters  at  a  central  bureau.  This  proved  a  great 
success  in  the  saving  of  labor,  and  is  a  credit  to  those  who  went  to  much 
trouble  to  establish  it  in  the  public  interest. 

There  was  an  invasion  of  the  London  market  by  foreign  companies,  thus 
increasing  the  size  of  the  market.  An  opening  was  certainly  made  for  them 
by  the  cutting  off  of  the  German  reinsurance  market.  The  establishment  of 
such  offices  has  been  criticized  on  the  ground  of  the  risk  of  leakage  of 
information.  It  is  obvious  that  the  fullest  guarantees  should  be  exacted, 
and  any  other  safeguards  which  the  authorities  consider  essential.  There 
are  those  who  consider  that  the  establishment  of  such  offices  in  London 
should  be  strongly  discouraged,  but  it  is  only  fair  to  remember  that  they 
bring  a  certain  amount  of  foreign  business  to  the  country  and  invest  in 
British  Government  securities;  and  that  British  offices  themselves  transact 
business  abroad.' 


Marine  Loss  Settlements 

Few  except  those  directly  engaged  in  marine  underwriting  are  familiar 
with  the  long-drawn-out  process  of  arriving  at  the  final  figures  of  the  losses 
of  marine  insurance  companies.  In  life  insurance,  except  for  the  insignifi- 
cant amount  of  the  disputed  claims,  the  totality  of  each  year's  losses  has 

'  Annual  Commercial  and  Financial  Review,  London  Times,  January 
19,  191 7. 


EFFECT   ON    MARINE   INSURANCE  I9I 

been  ascertained  before  the  close  of  the  year.  In  fire  insurance  and  in  the 
casualty  and  allied  insurances  there  is  some  lapping  over  of  loss  adjust- 
ments from  one  year  to  the  next,  but  the  amount  of  this  lapping  over  is  not 
large  in  proportion  to  the  sum-total  of  the  losses.  In  marine  insurance,  on 
the  other  hand,  it  may  almost  be  said  that  every  loss  except  a  total  loss 
remains  indeterminate  as  to  its  final  amount  for  a  twelve-month  period, 
and  the  complete  adjustment  of  a  very  considerable  part  of  the  losses  extends 
on  into  the  second  and  even  into  the  third  year.  To  the  outsider  the  work- 
ing out  of  the  "  average  "  on  the  hull  and  cargo  of  a  damaged  ship  appears 
one  of  the  slowest  and  most  exasperating  of  all  commercial  processes.  In 
such  a  period  of  worldwide  warfare  upon  the  high  seas  as  we  have  been 
passing  through,  the  difficulties,  uncertainties  and  delays  of  this  process,  as 
regards  the  business  of  marine  insurance  companies  as  a  whole,  are  greatly 
increased.  War  risks,  which  are  usually  written  for  each  voyage  or  for 
quite  short  periods,  are  disposed  of  much  more  quickly  than  marine  risks. 
An  underwriter,  therefore,  who  accepts  a  large  amount  of  war  business 
should  shortly  after  the  conclusion  of  the  first  year  be  in  a  better  position 
to  form  a  shrewd  idea  of  what  the  results  of  this  business  should  in  the 
main  be.  Consequently,  to  this  extent  the  first  year  settlements  are  a  real 
indication  of  the  final  settlements,  and  by  the  end  of  the  second  year  the 
complete  results  of  war  risk  underwriting  should  be  known. 

On  the  other  hand,  there  is  at  present  a  contrary  factor  at  work  affecting 
marine  risks  in  contradistinction  to  war  risks.  Owing  to  the  absolutely 
unprecedented  conditions,  ships  have  been  kept  at  work  during  the  war  as 
long  as  it  was  at  all  practicable  for  them  to  be  at  sea.  This  means  that 
repairs  have  been  deferred  much  past  the  usual  time,  and  this  will  help  to 
swell  the  third  year  settlements.  Further,  the  cost  of  repairs  has,  of  course, 
enormously  increased.  These  two  considerations  together  would  naturally 
tend  to  make  the  third  year  settlements  in  respect  of  pure  marine  insurance 
much  above  the  normal.  It  would,  therefore,  be  quite  impossible  without 
close  examination  into  the  circumstances  of  each  company's  business  to  pre- 
dict if  the  amounts  put  by  to  surplus  will,  or  will  not,  be  available  in  the 
present,  abnormal  circumstances  to  meet  all  the  demands  which  will  be  made 
upon  them.* 

The  following  table  shows  the  results  secured  by  the  leading 
English  marine  writing  insurance  companies  during  the  first  two 
years  of  the  war,  when  the  preceding  described  plan  was  being 
applied  and  when  the  new  hazards  of  shipping  were  being  met 
by  the  private  underwriters  in  competition  with  the  government 
insurance : 

'  The  Economic  World,  n.  s.,  vol.  xiii.  No.  20,  p.  709. 


192 


EFFECTS    OF   THE   WAR   UPON    INSURANCE 


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EFFECT    ON    MARINE    INSURANCE  193 

For  the  year   19 15,  statistics  of  certain  important  English 
marine  companies  arc  available. 

The  figures  in  the  following  table  are  a  guide  to  the  actual  profits  on  the 
underwriting  accounts  for  1915.  They  show  for  seven  companies  whose 
accounts  permit  an  analysis  on  the  same  simple  lines  the  net  premiums,  the 
actual  earnings,  after  allowing  for  all  claim  settlements  and  expenses,  and 
the  sums  put  to  suspense  to  close  the  accounts  and  the  percentage  of  the 
profit  to  the  net  premiums.  These  companies  may  be  regarded  as  represen- 
tative of  the  whole  market.  The  premiums  were  largely  increased,  and  the 
actual  profit  and  the  percentage  must  be  reckoned  as  distinctly  satisfactory. 
In  every  case  the  actual  profit  is  increased,  while  in  some  instances  the 
percentage  is  also  higher.  Thus  the  British  and  Foreign  earned  an  actual 
underwriting  profit  of  $995,755,  or  25.4  per  cent,  as  against  $533,8S5,  or  21.5 
per  cent  for  1915.  The  Indemnity's  profit  of  $802,660,  or  15.4  per  cent,  com- 
pares with  $523,400,  or  16.9  per  cent. 

The  Merchants'  figures  of  $326,265,  or  20  per  cent,  compare  with  $263,335, 
or  also  20  per  cent.  The  Reliance  earned  $14(5,105,  or  16.9  per  cent,  as 
against  $125,600,  or  18.3  per  cent.  The  Sea's  profit  of  $435,405,  or  14  per 
cent,  compares  with  $404,010,  or  17.2  per  cent.  The  Union  recorded  improved 
figures,  with  a  profit  of  $851,210,  or  15.3  per  cent,  as  against  $524,470,  or 
14.2  per  cent.  And  the  World  showed  also  much  improved  results,  with  a 
profit  of  $460,565,  or  23.9  per  cent,  as  against  a  profit  of  $204,525,  or  16.7  per 
cent,  for  1914. 

Surplus  on  1915  Account 

Company 
British  and  Foreign   .... 

Indemnity    

Merchants'    

Reliance   

Sea  

Union    

World     

In  the  second  table  are  set  out  the  premiums  accepted  last  year,  the  claims 
paid,  and  the  percentage  they  bore  to  the  premium.  In  each  case  the  increase 
in  premium  income  is  striking,  although  the  191 5  figures  had,  as  a  rule,  been 
far  larger  than  those  for  1914.  The  British  and  Foreign  increased  its  pre- 
mium income  by  $1,238,675 ;  the  premiums  of  the  Indemnity  were  raised  by 
as  much  as  $3,976,145;  the  Merchants',  which  is  understood  to  have  written 
little,  if  any,  war  risk  business,  increased  its  premium  income  by  $631,230; 
the  Reliance — an  office  which  has  been  successful  for  many  years  in  writing 
a  small  and  carefully  chosen  account — raised  its  premiums  by  $283,315;  the 
Sea  raised  its  premiums  by  as  much  as  $3,167,665,  whereas  its  whole  premium 
income  in  1915  amounted  to  $3,116,320;  the  Union  by  $i,395,500;  and  the 
World  by  $1,301,260. 


Net 

Profi 

its 

Premiums 

Expenses 

Actual 

% 

$3,921,840 

$310,585 

$995,755 

25-4 

5,216,695 

100,385 

802,660 

15-4 

1,633,815 

99,425 

326,265 

20.0 

863,765 

72,430 

146,105 

16.9 

3,116,320 

133,430 

435,405 

14.0 

5,559,770 

230,750 

851,210 

15-3 

1,926,180 

41,420 

460,565 

239 

194  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

First  Year  Settlements  in  1916 

Company       ,  Premiums  Claims            Percentage 

British  and  Foreign $5,160,515  $1,388,675  26.9 

Indemnity    9,192,840  3,330,550  36.2 

Merchants'    2,265,045  534,790  23.6 

Reliance 1,147,080  296,645  25.9 

Sea    6,283,985  2,473,550  394 

Union     6,955,270  2,740,255  39.4 

World     3,227,440  1,170,405  36.3 

These  are,  on  the  whole,  large  increases,  and  it  is  to  the  credit  of  the 
London  insurance  market  that  underwriters  have  been  willing  to  assume  such 
enormous  liabilities  as  are  represented  by  these  figures  of  premium  incomes. 
The  market  has  thereby  undoubtedly  vastly  assisted  the  maintenance  of  com- 
merce. It  must  be  apparent  to  any  one  who  studies  even  most  superficially 
the  weekly  figures  of  British  losses  that  nerve  is  needed  to  write  large  war 
risk  accounts.  Neutrals  have  at  all  times  been  assured  of  being  able  to  place 
their  risks  in  the  English  market,  which  has  consequently  been  ijp  a  position 
to  reaffirm  its  value  and  preeminence. 

The  second  striking  feature  in  the  table  is  that  the  percentage  of  settle- 
ment in  1916  was  in  every  case  higher  than  in  1915.  Thus,  the  British  and 
Foreign  settlement  of  26.9  compares  with  25.4  per  cent  in  1915;  the  Indem- 
nity settled  36.2  per  cent,  as  against  30  per  cent;  the  Merchants'  settled  23.6 
per  cent,  as  against  22  per  cent ;  the  Reliance  settled  25.9  per  cent,  as  against 
23.9  per  cent;  the  settlement  of  the  Sea  was  39.4  per  cent,  as  against  31.2 
per  cent ;  the  Union  also  settled  39.4  per  cent,  as  against  38.9  per  cent ;  and 
the  World  paid  out  36.3  per  cent  of  the  premiums,  as  against  32  per  cent 
in  the  previous  year.  These  in  the  main  would  be  heavy  first  year  settle- 
ments for  ordinary  accounts  and  would  not  promise  much  profit  after  the 
second  and  third  year  settlements  have  been  made;  but,  happily,  as  has 
already  been  indicated,  where  war  risks  are  written  first  year  settlements 
should  naturally,  owing  to  the  fact  that  they  "  run  off  "  quickly,  be  heavier.* 


Effect  of  High  Rates 

It  will  be  observed  that  notwithstanding  "  the  heavy  losses 
caused  by  the  submarines  of  the  Central  Powers  in  the  world's 
shipping  still  free  to  traverse  the  seas,  the  war  has  brought  a 
very  high  degree  of  prosperity  to  the  British  marine  under- 
writers. They  have  had  enormous  claims  to  pay,  to  be  sure, 
but  they  have  been  more  than  able  to  recoup  themselves  for 
these  losses  by  reason  of  the  exceedingly  high  level  to  which 
marine  rates,  even  excluding  marine  war  risk  rates,  have  risen. 

*  The  Economic  World,  n.  s.,  vol.  xiii.  No.  20,  p.  709. 


EFFECT   ON    MARINE   INSURANCE  I95 

This  rise  in  ordinary  marine  rates  has  been  brought  about,  on 
the  one  hand,  by  the  psychological  eflfects  of  the  known  hazards 
upon  the  minds  of  those  requiring  marine  insurance,  making 
them  accept  without  very  serious  demur  abnormally  high 
premium  charges,  even  when  the  war  risk  was  covered  sep- 
arately; and,  on  the  other  hand,  by  the  great  enhancement  of 
the  values  insured,  whether  of  ships  themselves  or  of  their 
cargoes.  The  enhancement  of  values  has  of  course  greatly 
increased  the  amounts  at  hazard  on  single  risks,  and  has  made 
the  coverage  of  each  single  risk  a  proportionally  severer  drain 
upon  the  market  than  under  prewar  conditions.  The  marine 
insurance  market  has  accordingly  been  a  *  sellers'  market '  al- 
most from  the  beginning  of  the  war;  and  it  is  a  well  known 
economic  fact  that  the  tendency  of  price  in  a  *  sellers'  market ' 
is  invariably  upward,  and  upward  at  a  more  rapid  rate  than  the 
mere  increase  of  the  business  turnover  would  seem  to  warrant 
in  the  eyes  of  the  uninitiated. 

"  The  large  profits  made  by  the  British  marine  companies 
during  the  war,  and  especially  during  the  past  two  years,  have 
naturally  attracted  the  attention  of  British  investors  proper  and 
speculative  investors,  who  have  seen  the  shares  of  these  com- 
panies advance  to  levels  higher  even  than  those  obtaining  for 
them  before  the  war,  while  the  prices  of  the  greater  part  of  the 
securities  dealt  in  on  the  London  Stock  Exchange  have  been 
dishearteningly  downward.  This  interest  on  the  part  of  the 
public  has  made  possible  a  considerable  amount  of  financial 
rearrangement,  consolidation,  absorption  and  the  like  among  the 
British  marine  companies,  with  the  fire  companies  to  some  extent 
taking  a  hand  in  the  game.  Naturally,  the  future  of  British 
marine  underwriting,  even  long  after  the  war  is  over,  has  been 
represented  as  roseate  in  the  extreme,  and  investments  in  the 
shares  of  the  enlarged  or  consolidated  companies  have  been 
held  out  as  extraordinarily  promising."  ^ 

*  The  Economic  World,  n.  s.,  vol.  xiv,  No.  10,  p.  348. 


196  EFFECTS    OF    THE    V/AR    UPON    INSURANCE 

Amalgamation  of  Companies 

The  amalgamations  which  have  been  announced  fall  into  three  groups. 
Marine  insurance  companies  are  passing  over  to  big  composite  offices,  non- 
tariff  fire  offices  are  being  absorbed  by  tariff  companies,  and  a  new  compos- 
ite company  is  arising  by  fusions  between  the  British  Dominions  Company 
and  several  life  offices.  To  take  the  last  first.  The  British  Dominions,  which 
on  its  own  account  has  established  a  large  marine  department  and  is  rapidly 
developing  in  other  directions,  has  drawn  to  itself  the  Eagle,  the  Sceptre, 
and  the  Star,  all  purely  life  companies.  The  Star,  an  office  with  a  large 
Nonconformist  connection,  is  to  be  purchased  with  £200,000  of  War  Loan 
stock  and  20,000  Eagle  and  British  Dominions  shares  of  £3  each.  For  each 
five  shares  (£1  is.  paid)  the  Star  shareholders  will  get  £10  in  5  per  cent 
War  Loan  and  one  fully  paid  Eagle  and  British  Dominions  share  of  the 
nominal  value  of  £3  and  the  actual  value  of  about  £6  los.  The  paid-up 
capital  will  be  £635,000,  and  the  total  assets  £12,235,000.  Recently  the  Car 
and  General  passed  over  to  the  Royal  Exchange,  and  the  Fine  Art  and  Gen- 
eral to  the  North  British  and  Mercantile.  Now  the  Commercial  Union  takes 
over  the  National  of  Great  Britain,  and  pays  £6  2S.  a  share,  £6  in  War 
Loan  stock  at  95,  and  the  balance  in  cash.  The  National  Company  has 
50,000  shares  of  £5  each  (£1  paid),  and  is  one  of  the  numerous  insurance 
companies  started  in  Glasgow.  It  has  grown  into  a  law  of  insurance  prac- 
tice that  the  more  successful  a  non-tariff  fire  office  becomes,  the  more  certain 
is  it  to  pass  over  to  a  big  tariff  fire  company.  What  is  less  common  is  that 
life  offices  without  fire  or  other  connections  should  be  fused  with  general 
companies.  We  can  not  recall  any  precedent  for  the  manner  in  which  the 
British  Dominions  is  expanding  by  the  absorption  of  life  companies,  though 
it  is  a  perfectly  legitimate  method,  which  in  the  working  out  will  be  watched 
with  interest.^ 

Marine  Insurance  in  the  United  States 

In  the  United  States  the  situation  as  respects  marine  insurance 
was  a  difficult  one.  Not  only  was  there  an  insufficient  number 
of  vessels  to  carry  the  large  amount  of  goods  which  the  European 
nations  wanted,  but  the  facilities  for  insuring  the  vessels  and 
cargoes  were  to  be  had  only  at  very  high  rates.  Marine  insur- 
ance by  domestic  companies  in  the  United  States  had  enjoyed 
no  such  development  as  had  life  or  fire  insurance.  During  the 
past  year  it  has  been  increasing. 

There  are  no  available  statistics  of  ocean  marine  insurance.  The  great 
bulk  of  it  has  been  written  by  British  stock  companies  and  by  individual 
underwriters  at  Lloyd's,  London.     There  the  details  of  such  operations  are 

'  The  Economist,  September  15,  1917. 


EFFECT   ON    MARINE   INSURANCE  I97 

trade  secrets — reports,  if  any,  being  made  in  confidence  subject  to  test  by  a 
committee  of  the  Board  of  Trade  and  by  audit  of  Lloyd's.  Thus  their 
volume  is  a  business  secret  in  the  keeping  of  business  committees,  and  com- 
bined trade  balances  only  are  made  public.  For  similar  reasons  there  is  an 
absence  of  analytical  reports  of  the  insurance  of  most  other  nationals.  In 
the  United  States  comprehensive  statistics  are  kept  by  most  classes  of  the 
business  transacted  in  this  country.  But  even  here  the  inland  marine  transac- 
tions are  combined  with  the  ocean  marine,  so  there  are  no  specific  returns 
of  the  latter.  In  the  United  States  for  the  past  three  calendar  years  the 
combined  inland  and  ocean  marine  premiums  were  reported  as  follows:* 

1914    $32,1 14.926 

1915    47,418,071 

1916    70,663,999 

These  increases  represent  the  increased  values  and  rates  of  American  busi- 
ness carried  during  the  war.  An  analysis  of  the  premiums  reported  and 
unreported  distributes  them  as  follows : 


1914 

Reported  Unreported 

23  American  companies    $18,974,216  

19  British  companies    8,808,245  $9,634,478 

13  other  foreign  companies  4,332,465  1,070,497 

55  Totals    $32,114,926  $10,704,975 

1915 

Increase 

%  Reported  Unreported 

23  American  companies    48  $23,071,557                      

19  British  companies    45  12,851,204  $14,225,421 

13  other  foreign  companies  .,            50  6,495,310  1,580,602 

55  Totals $42,418,071  $15,806,023 

1916 

Increase 

%  Reported  Unreported 

23  American  companies    47  $41,208,085                       

19  British  companies    38  17,712,774  $21,199,200 

13  other  foreign  companies  . .            82  11,743,140  2,355,466 

55  Totals $70,663,999  $23,554,666 

*  These  figures  apply  only  to  business  written  and  reported  to  the  State 
of  New  York.  Marine  underwriters  estimate  a  volume  of  premiums  equal 
to  one-third  of  those  reported  as  being  written  abroad  on  American  business 
by  British  and  other  foreign  companies  and  Lloyd's  admitted  to  do  business 
here,  but  making  no  reports  of  the  same  here  and  thus  avoiding  taxation. 
The  law  can  not  reach  out  and  require  compliance  in  Europe.  With  that 
estimated  addition  the  approximate  actual  figures  would  be  for  1914  about 
$43,000,000,  for  1915  about  $63,000,000,  and  for  1916  about  $94,000,000. 


198  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

When  the  amount  (one-third)  of  unreported  business  written  by  foreign 
companies  is  considered  it  will  be  seen  that  the  premium  increase  of  British 
companies  was  far  greater  than  all  the  others. 

It  will  be  noted  by  casual  analysis  of  these  figures  that  American  com- 
panies write  a  little  more  than  half  the  United  States  marine  business  and, 
when  the  unreported  writings  are  considered,  less  than  half.  This  has  been 
due  to  the  lack  of  American  bottoms  and  lack  of  prestige  of  American  insur- 
ance connections  abroad.  There  is  more  than  this  to  be  considered,  how- 
ever. A  considerable  share  of  the  ocean  marine  premiums  written  and 
reported  by  American  companies  comes  from  the  reinsurance  of  excess  lines 
written  by  British  companies  abroad  on  great  tonnages  carried  in  one  vessel. 
It  would  be  quite  fair  to  assume,  therefore,  that  only  one-third  of  reported 
American  business  is  written  by  American  companies.^ 

When  the  European  War  was  merely  a  possibility  the  under- 
writers accepted  war  risks  at  reasonable  rates,  but  4s  soon  as 
this  war  became  a  reality,  the  demands  for  insurance  were  so 
great  that  a  general  paralyzation  of  business  resulted. 

In  the  week  directly  following  August  i,  19 14,  the  rates  were 
almost  prohibitive  and  shippers  paid  as  high  as  25  to  30  per 
cent  to  cover  war  risks  through  the  North  Sea.  South  American 
rates  were  up  to  20  per  cent,  while  rates  to  India  and  the  Far  East 
ranged  from  15  to  20  per  cent. 

The  underwriters  in  this  country  were  placed  in  a  very  difficult 
position  and  the  reinsurance  markets  at  London  were  closed  on 
account  of  a  bank  holiday  at  this  time.  For  three  days  risks  were 
accepted  without  any  possibility  of  reinsuring  any  part  of  those 
which  might  prove  to  be  undesirable.  It  was  therefore  necessary 
to  limit  the  amount  which  could  be  accepted  on  any  one  vessel, 
and  these  amounts  ranged  from  small  amounts  for  smaller  com- 
panies to  $100,000  or  $150,000  as  a  maximum  for  the  larger 
companies.  The  shipper,  therefore,  could  insure  only  part  of  his 
cargo  and  often  had  to  carry  a  large  portion  of  the  risk  himself. 
The  underwriters  were  unable  to  get  any  information  about  the 
vessels  which  they  had  insured,  for  the  cables  were  so  busy  that 

'  The  Vital  Relation  of  Insurance  to  Banking  and  Shipping  in  the  World's 
Trade  after  the  War,  Henry  Evans,  President  Continental  Fire  Insurance 
Company. 

Since  the  war,  marine  insurance  business  has  been  increased.  New  com- 
panies have  been  organized  and  old  companies,  marine  and  fire,  have  pre- 
pared to  extend  the  business. 


EFFECT   ON    MARINE   INSURANCE  I99 

no  reports  of  vessels  could  be  obtained.  Occasionally  an  item 
appeared  in  the  newspapers  that  such  and  such  a  vessel  had  been 
taken  by  the  British,  or  had  been  sunk  by  the  Germans,  but  these 
were  all  rumors  and  none  of  them  could  be  confirmed.  It  will, 
therefore,  be  seen  that  the  underwriters  of  this  country  were  in 
a  very  peculiar  and  difficult  position,  and  when  on  August  7,  1914, 
Secretary  McAdoo  called  a  conference  of  the  large  business  inter- 
ests of  this  country,  the  suggestion  was  made  that  a  Bureau  of 
War  Risk  Insurance  be  established  by  the  United  States  Govern- 
ment in  the  Treasury  Department,  to  assist  the  underwriters  of 
this  country  in  taking  care  of  the  shippers  and  shipowners. 

The  War  Risk  Bureau 

On  August  14,  1914,  the  bill  for  the  creation  of  this  Bureau 
was  drafted,  and  on  August  19,  1914,  it  was  introduced  in  the 
Senate  by  Mr.  Clark  of  Arkansas,  passing  the  Senate  on  August 
21,  with  amendments.  In  the  House  the  measure  was  bitterly 
opposed  but  passed,  with  additional  amendments,  on  August  29, 
1914.  The  Senate,  on  August  31,  1914,  agreed  to  the  House 
amendments,  and  the  bill  was  referred  to  the  President,  who 
signed  it  on  September  2,  19 14. 

On  September  3,  19 14,  the  Bureau  was  prepared  to  accept 
business,  but  on  account  of  the  delay  necessitated  by  waiting  for 
the  printed  applications  and  policies,  no  insurance  could  be  actu- 
ally written,  and  until  the  i8th  of  September  all  risks  submitted 
were  held  on  "  binders."  After  that  time  policies  were  issued 
rapidly. 

During  the  time  that  the  Bureau  has  been  covering  war  risks 
many  vessels  which  could  not  secure  insurance  in  the  open 
market  have  been  assisted  by  this  Bureau,  and  enabled  to  sail 
on  voyages  which  would  not  have  been  possible  had  the  Bureau 
not  been  in  existence. 

On  June  12,  191 7,  the  President  signed  an  amended  War 
Risk  Bill  which  allowed  the  Bureau  to  insure  masters,  officers 
and  crews  of  American  merchant  vessels  against  loss  of  life  or 


200  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

personal  injury  by  the  risk  of  war,  and  for  compensation  during 
detention  following  capture  by  enemies  of  the  United  States. 
This  insurance  has  been  mandatory  on  vessel  owners  for  all 
voyages  through  the  war  zone,  and  this  insurance  is  permissible 
for  voyages  on  any  route.  A  large  amount  has  already  been 
issued,  and  the  Bureau  sustained  its  first  loss  on  the  sinking  of 
the  Kansan,  where  four  men  lost  their  lives,  and  their  famihes 
or  dependents  received,  as  a  result,  $7,200. 

This  Bureau  was  placed  in  charge  of  a  director  who  was  an 
experienced  underwriter.  All  quotations  of  rates  were  made  for 
forty-eight  hours'  acceptance  and  upon  filing  of  applications, 
accompanied  by  a  certified  check  and  with  a  warranty  that  the 
vessel  would  sail  within  fifteen  days.  «^ 

Without  some  such  plan  for  government  war  risk  insurance, 
shipping  could  not  have  been  transacted.  An  examination  of 
the  material  in  the  Appendix,  which  includes  selected  appH- 
cation  blanks,  policies,  and  the  original  act  establishing  the  Bureau 
and  defining  its  method  of  operation,  will  explain  its  work. 

The  following  table  shows  the  amount  of  business  transacted 
by  the  Bureau : 

(1,704  Policies  Issued  September  2,  1914,  to  November  30,  1916) 

Total  amount  insured  $167,650,397.00 

Premiums  received  on  same  3,167,997.20 

Salvage  received  to  date 59,055.87 

Total  amount  at  risk 15,902,285.00 

Known  losses  to  date  833,924.60 

Possible  outstanding  claims    250,000.00 

Net  losses    (paid) 774,868.73 

Total  expenses  of  Bureau,  November  30,  (includ- 
ing salaries  of  entire  force) 39,877.03 

Total  premiums  received   $3,167,997.20 

Known   losses  to   date $833,924.60 

Less  salvage  received   59,055.87 

Net  losses  paid  774,868.73 

Surplus    premiums    on    hand $2,393,128.47 

In  addition  to  this  insurance  of  property  by  the  War  Risk 
Insurance  there  was  established  on  June  12,  19 17,  by  an  amend- 


EFFECT    ON    MARINE    INSURANCE  20I 

ment  to  the  law,  a  provision  "  that  whenever  it  shall  appear 
to  the  Secretary  of  the  Treasury  that  the  effecting  of  such  insur- 
ance is  desirable  in  the  national  interest  in  the  case  of  vessels, 
engaged  in  any  trade,  the  owner  of  every  American  merchant 
vessel  engaged  in  such  trade  shall  insure  the  master,  ofificers  and 
crew  of  such  vessel  against  the  loss  of  life  or  personal  injury 
from  war  risks,  as  well  as  for  compensation  during  detention 
by  an  enemy  of  the  United  States  following  capture."  This  was 
an  adoption  of  a  plan  already  in  practice  in  England.  Such 
insurance  could  be  effected  either  with  the  Bureau  of  War  Risk 
Insurance  or  in  insurance  companies.  Death  or  permanent  dis- 
ability was  to  be  compensated  for  in  sums  ranging  from  $1,500 
to  $5,000,  and  loss  of  hand,  arm,  foot,  leg  or  eye  in  sums  from 
45  per  cent  to  65  per  cent  of  this  principal  sum. 

Further  provisions  of  this  amended  act  may  be  found  by 
consulting  the  Appendix. 

Marine  Insurance  in  France 

In  France  arrangements  for  government  aid  were  made  as  in 
most  of  the  other  countries  at  war,  although  on  no  such  ex- 
tensive a  plan  as  in  the  case  of  England. 

The  system  of  insurance  of  cargoes  formed  the  object  of  the 
decrees  of  August  13  and  October  10,  1914,  ratified  by  a  law 
of  April  10,  1915,  which  was  completed  by  that  of  February  27, 
19 1 7.  According  to  the  terms  of  these  laws,  French  government 
insurance  is  applicable  only  to  cargoes  going  from  and  to  France 
or  from  and  to  the  colonies  and  countries  of  the  protectorate 
and  sailing  under  the  national  flag. 

The  original  premium  payable  for  the  insurance  of  cargoes 
exported  or  imported  from  America  to  France  is  7  per  cent  in 
the  case  of  steamers  and  14  per  cent  in  the  case  of  sailing  vessels. 
This  minimum  rate,  applicable  to  the  first  million  francs  (or 
$193,000  of  insurance),  is  increased  at  the  rate  of  5  per  cent 
for  every  additional  million  or  fraction  of  a  million.  In  the 
event  of  the  ship  not  having  been  specially  designated  at  the 


202 


EFFECTS   OF   THE    WAR   UPON    INSURANCE 


time  of  the  application  for  insurance,  the  original  tariff  would 
be  increased  by  lo  per  cent. 

Insurance  contracts  for  ships  leaving  America  are  valid  for 
45  days,  and  for  30  days  for  those  leaving  France;  they  may 
be  prolonged  by  payment  of  an  additional  premium. 

The  rates  given  are  those  which  are  quoted  by  the  executive 
committee,  but  they  are  liable  to  daily  fluctuation.  Also  it  would 
be  necessary,  if  the  insured  resides  in  the  United  States,  that 
he  have  a  representative  in  France  who  would  undertake  to 
sign  the  policies  and  pay  the  premium  into  the  Treasury. 

Marine  Insurance  in  Germany 

.  Information  from  the  Central  Powers  is  very  difficult  to 
obtain,  but  a  condensed  statement  of  the  financial  results  of 
German  marine  companies  is  given :  ^ 

As  in  1914,  forty-eight  companies  are  reported  as  writing  marine  business, 
which  in  1914  showed  an  underwriting  loss  and  in  1915  a  hardly  appreciable 
profit;  the  premium  income,  as  would  be  expected,  has  fallen.  The  two 
years'  figures  are  as  follows: 

Surplus 
over 
Net  Net         Premium    Losses  and 

Premiums      Losses       Reserve      Expenses 
M.  M.  M.  M. 

1914 120,342,099    99,451,104    37,255,335     1,166,094 

1915 115,460,276    92,250,097    37,344,747         69,371 


Interest 

and 

Other 

Receipts 

M. 

Depre- 
ciation 
Written 

off 

M. 

5,628,223 
5,685,437 

178,676 
1,474,519 

Reinsurance. — Two  new  companies,  the  Dusseldorfer  Allgemeine,  of  Diis- 
seldorf,  and  the  Niederrheinische  Giiterassekuranz,  of  Wesel,  have  entered 
the  lists,  increasing  the  number  to  forty-five ;  the  Europa  and  Frankona  have 
transferred  their  head  offices  from  Frankfort-on-Main  to  Berlin.  The  total 
premium  income  has  declined  a  little  and  an  underwriting  profit  of  under 
3^  per  cent  is  decidedly  thin,  though  better  than  that  of  last  year.  The 
comparison  is: 


Net 
Premiums 

M. 

Net 

Losses 

M. 

Surplus 
over 
Premium   Losses  and 
Reserve      Expenses 
M.               M. 

Interest 

and 

Other 

Receipts 

M. 

Depre- 
ciation 
Written 

off 

M. 

306,331,772 

299,064,728 

179,243,219 
169,794,072 

446,362,410    4,226,398 
489,094,506    9,815,169 

9,248,249 
10,233,325 

2,613,297 
6,128,674 

'  Post  Magazine  and  Insurance  Monitor,  January  6,  1917. 


EFFECT   ON    MARINE   INSURANCE  2O3 

In  Germany,  as  in  England,  one  effect  of  the  war  on  marine 
insurance  seems  to  be  to  produce  a  tendency  toward  the  amal- 
gamation of  companies. 

The  last  decade  before  the  war,  owing  to  the  keen  competition,  was  in 
general  not  very  profitable  for  German  marine  insurance ;  in  the  very  week 
before  war  was  declared  many  German  insurers,  incredulous  of  war  with 
England,  undertook  war  risks  at  ridiculous  rates,  to  their  own  undoing.  In 
1914  and  1915,  therefore,  many  German  companies  showed  a  considerable 
decline  in  their  receipts  from  premiums,  and  in  some  cases  they  registered 
actual  losses. 

The  companies,  however,  accommodated  themselves  to  the  changed  con- 
ditions. The  war  gave  them  the  monopoly  of  the  German  business,  which 
previously  was  placed  in  England,  either  directly  or  by  way  of  reinsurance. 
Full  advantage  was  taken  of  the  growing  shipping  boom  in  neutral  coun- 
tries, particularly  in  Scandinavia  and  Holland.  Business  was  satisfactory 
apart  from  a  few  isolated  instances,  and  the  falling  off  in  premiums  was 
being  made  good,  until  the  intensified  submarine  activity  not  only  occasioned 
the  German  companies  serious  loss,  but  also  limited  their  neutral  business. 

The  satisfactory  development  of  business  during  the  war  seems  now  to  be 
causing  many  German  marine  insurers  to  entertain  exaggerated  hopes  for  the 
years  following  the  war.  As  is  intelligible,  there  is  a  strong  desire  to  keep 
the  monopoly  of  German  business,  and  to  exclude  England  altogether  from 
the  German  market.  Negotiations  are  in  progress  under  government  direc- 
tion for  the  purpose  of  reserving  to  German  insurers  and  their  reinsurers 
in  Allied  and  neutral  countries  the  insurance  of  the  large  volume  of  imports 
expected  during  the  transition  period.  It  may  be  assumed  that  they  will  be 
successful,  although  the  values  to  be  covered  by  each  separate  policy  must, 
of  course,  both  as  regards  cargoes  and  hulls,  be  many  times  greater  than 
before  the  war. 

Amalgamations  in  Germany 

The  demands  made  on  the  individual  companies  will  thus  be  greatly 
increased.  Many  of  them  are  already  preparing  for  these  eventualities, 
partly  by  increasing  their  capital  and  partly  by  fusions.  Examples  of  the 
latter  policy  may  be  found  in  the  amalgamation  of  the  Frankfurter  Allge- 
meine  Versicherungsgesellschaft  with  the  Deutsche  Transport  Versicher- 
ungsgesellschaft,  the  Thuringia,  and  the  Fortuna;  and  the  alliance  between 
the  Union  and  the  Friedrich  Wilhelm  companies.  New  companies  are  also 
being  founded ;  examples  are  the  establishment  of  the  Hamburger  Lloyd  by 
the  Duncker  group  and  the  utilization  of  the  Berliner  Land  und  VVasser  by 
the  same  group  after  an  increase  in  its  capital.  The  Mutzenbecher  group  is 
strengthening  its  position  by  an  arrangement  with  the  Securitas,  Bremen ; 
and  another  big  Hamburg  concern  has  associated  itself  with  a  well  known 
reinsurance  company. 


204  EFFECTS    OF   THE    WAR   UPON    INSURANCE 

In  face  of  all  this,  it  is  difficult  to  understand  why  a  new  plan  is  being 
considered  for  setting  up,  on  the  model  of  Lloyd's,  a  "  Seegilde "  (Sea 
Guild),  in  Hamburg,  which  is  to  consist  of  individual  insurance  brokers. 
Each  of  these  is  to  deposit  M.  100,000 ;  and  the  policies  given  are  to  be 
secured,  in  whole  or  in  part,  upon  the  fund  so  created  as  well  as  the  indi- 
vidual insurer's  other  property.  In  the  interests  of  Germany's  economic 
strength,  this  scheme  must  be  opposed  as  likely  merely  to  increase  compe- 
tition. The  individual  insurer  of  the  "  Seegilde "  will  have  to  be  content 
with  lower  premiums,  in  order  to  attract  business  from  the  insurance  com- 
panies, which,  of  course,  offer  greater  security.  Premiums  are,  however, 
already  depressed. 

•The  writer  can  not  restrain  his  surprise  that  the  general  secretary  of  the 
International  Transport  Insurance  Union,  Berlin,  should  be  in  favor  of  this 
"  Seegilde  "  idea,  indicating  that  if  it  does  not  mature  in  Hamburg  the  "  See- 
gilde "  will  be  set  up  in  Berlin.  He  would,  moreover,  call  attention  to  two 
specifically  war  insurance  institutions,  both  in  Berlin,  in  the  establishment 
of  which  the  Empire  participated.  *■ 

(i)  The  Deutsche  See-Versicherungsgesellschaft  von  1914  (German  Ma- 
rine Insurance  Company,  1914),  which  was  set  up  at  the  outbreak  of  the 
war;  and 

(2)  The  Deutsche  Versicherungsbank  (German  Insurance  Bank),  estab- 
lished in  1916. 

Both  these  concerns  are  expected  to  render  assistance  in  the  insurance  of 
the  enormous  imports  and  exports  during  the  transition  period  and  of  ships 
of  the  Imperator  and  Columbus  types.  It  may  be  doubted  whether  the  state 
will  participate  to  any  great  extent  in  transport  and  marine  insurance,  since 
these  branches  of  insurance  business  hardly  lend  themselves  to  state  enter- 
prise. Moreover,  it  is  questionable  whether  it  would  be  in  the  economic 
interests  of  the  country  to  limit  German  marine  insurers  to  German  busi- 
ness. Marine  insurance  requires  more  possibilities  of  adjustment  than  do 
other  kinds  of  insurance.  Hence  interchange  of  business  with  other  mari- 
time nations  should  be  aimed  at,  always  bearing  in  mind  that  the  pre- 
dominant position  which  the  English  marine  insurance  market  occupied 
before  the  war  must  not  again  be  tolerated.* 


Marine  Insurance  in  Japan 

In  no  other  country,  except  in  the  United  States,  has  the  war 
had  a  greater  effect  in  stimulating  the  carrying  trade  than  in 
Japan.  The  government  of  this  country,  in  order  to  protect  its 
shipping  and  encourage  its  development,  provided  government 
assistance  in  granting  insurance  for  the  merchant  marine. 

*  MUnchener  Neueste  Nachrichte,  quoted  by  the  Journal  of  Commerce, 
August  20,  1917. 


EFFECT   ON    MARINE   INSURANCE  205 

The  system  of  government  marine  insurance  instituted  in  Japan  shortly 
after  the  declaration  of  war  in  1914,  differs  materially  from  that  established 
by  other  governments  which  undertook  to  relieve  the  scarcity  of  war  risk 
marine  insurance.  In  most  cases  a  regular  fund  or  bureau  has  been  started 
which  actually  receives  premiums  and  distributes  payments  in  settlement  of 
losses.  In  some  cases,  also,  excess  lines  written  by  private  companies  are 
reinsured.  The  method  employed  in  Japan  is  outlined  in  the  following 
extract  from  The  Fifteenth  Financial  and  Economic  Journal  of  Japan 
(1915),  issued  by  the  Japanese  Government. 

The  War  Marine  Insurance  Indemnity  Act  was  promulgated  on  Septem- 
ber II,  1914,  and  the  Ordinance  No.  19  of  the  Department  of  Agriculture 
and  Commerce  on  the  following  day,  and  both  were  immediately  put  in 
force.  According  to  the  act  above  referred  to,  if  any  Japanese  Insurance 
company,  or  any  foreign  insurance  company  having  branches,  offices  or 
agencies  in  Japan,  makes  a  marine  insurance  contract  at  a  premium  not 
higher  than  the  rate  fixed  by  the  competent  authorities  and  makes  good 
therefor  any  loss  or  damage  caused  by  war,  the  government  is  to  grant  as 
indemnity  to  such  insurance  company  a  portion  of  the  sum  thus  made  good. 
It  is  provided  for  in  Ordinance  No.  19  of  the  Department  of  Agriculture 
and  Commerce  that  the  amount  to  be  so  granted  by  way  of  indemnity  shall 
be  80  per  cent  of  the  sum  thus  made  good.* 


Marine  Insurance  in  Sweden 

In  Sweden,  a  nation  with  an  important  merchant  marine,  gov- 
ernment assistance  was  also  granted.  This  plan  provided  both 
for  direct  government  insurance  and  also  for  acceptance  of  war 
risk  insurance  for  the  account  of  different  private  insurance 
companies. 

Marine  Insurance  in  Russia 

With  a  few  exceptions  the  Russian  insurance  companies  which 
undertook  marine  insurance  before  the  war,  restricted  at  first 
their  business  to  the  national  rivers  and  waterways,  but  later 
there  was 

a  considerable  extension  of  the  field  of  operation,  and  the  majority  of  com- 
panies have  added  the  transaction  of  marine  insurance  generally  to  their 
program.  Before  the  war,  the  greater  part  of  the  surplus  from  Russian 
marine  business  was  reinsured  with  German  companies,  who  appreciated  the 

'  The  Economic  World,  n.  s.,  vol.  xi,  1916,  p.  258. 


206  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

value  of  this  business ;  but  all  these  contracts  are  cancelled,  and  the  London 
market  assumed  a  large  share  of  the  business. 

Most  of  the  companies  have  agencies  in  London,  chiefly  for  the  purpose  of 
reinsurance  business.  The  Rossia  was  the  first  to  establish  a  branch  office 
in  England,  and  it  also  has  a  branch  office  in  the  United  States  at  Hart- 
ford, Connecticut,  where  it  erected  its  own  building  in  the  spring  of  1914. 
The  First  Russian,  the  Moscow,  the  Northern,  the  Warsaw,  the  Salamandra, 
the  Second  Russian  and  the  Jakor  are  also  licensed  to  transact  United  States 
business. 

In  those  cases  where  separate  figures  are  given,  the  marine  war  risks  sec- 
tion for  1915  is  seen  to  have  been  decidedly  profitable;  75  per  cent  of  the 
liability  is  undertaken  by  the  Russian  government,  the  remaining  25  per 
cent  being  pooled  among  the  companies.* 

Summary 

It  may  therefore  be  stated  by  way  of  summarizing  the  effect 
of  the  war  on  marine  insurance :  first,  that  all  the  leading  nations 
have  found  it  necessary  to  grant,  either  directly  or  indirectly, 
aid  in  the  insuring  of  war  risks;  second,  this  has  not  meant  the 
absorption  of  the  private  companies,  but  on  the  contrary  a  co- 
operation with  such  companies,  and  in  all  probability  a  healthy 
competition  which  has  had  a  marked  effect  in  keeping  down 
rates,  and  at  all  times  stabilizing  such  rates,  just  as  the  govern- 
mental activities  in  relation  to  food  supplies  and  certain  important 
commodities  in  great  demand  on  account  of  the  war  has  had 
the  effect  of  preventing  violent  fluctuations  in  their  prices ;  third, 
the  private  insurance  companies  have  in  practically  all  the  leading 
countries  enjoyed  a  period  of  prosperity,  and  in  many  cases  their 
financial  returns  have  been  in  excess  of  that  enjoyed  in  times 
of  peace. 

*  The  Economic  World,  n.  s.,  vol.  xii,  No.  14,  p.  435. 


THE  EFFECT  OF  THE  WAR  ON  FIRE 
INSURANCE 

It  might  seem  upon  first  thought  that  fire  insurance  would  be 
but  sHghtly  affected  by  the  war.  It  is  true  that  this  form  of 
insurance  is  not  so  directly  affected  by  such  disorganizing 
agencies  as  the  submarine  in  marine  insurance  and  the  higher 
mortality  in  life  insurance;  yet  there  are  certain  disturbances 
resulting  from  the  war  which  are  common  to  all  forms  of  insur- 
ance, and  in  fire  insurance  there  are  unfavorable  factors  peculiar 
to  this  form  of  insurance. 

In  recent  wars,  damage  and  destruction  of  property,  in  so 
far  as  fire  insurance  was  affected,  were  largely  confined  to  the 
immediate  territory  occupied  by  the  hostile  forces.  The  older 
plan  and  operations  of  war  under  which  both  the  enemy  and 
his  lands  were  objects  of  destruction,  had  given  way  to  the 
idea  that  the  countries  or  nations  alone  were  hostile  and  that  the 
suppression  of  the  military  power  of  the  nation  was  the  end  to 
be  achieved  in  the  conduct  of  the  war.  Under  such  a  theory 
of  what  might  ironically  be  called  civilized  warfare,  the  non- 
combatant  and  private  property  not  in  active  use  against  the 
enemy  were  not  considered  proper  subjects  of  attack,  capture 
and  destruction.  Even  principles  of  compensation  for  the  taking 
of  such  private  property  by  the  enemy  under  circumstances  of 
great  need  had  some  application.  But  the  present  great  war 
seems  to  be,  in  its  method  of  conduct,  a  reversion  to  the  earlier 
state  of  lawlessness.  Destruction  of  private  property  far 
removed  from  the  regions  of  combat  is  common. 

New  Fire  Hazards 

There  have  been,  therefore,  in  operation  not  only  the  ordinary 
fire  insurance  hazards  of  warfare,  but  there  has  been  introduced 

207 


208  EFFECTS    OF   THE   WAK   UPON    INSURANCE 

a  number  of  new  hazards.  The  invention  of  the  airplane  has 
made  possible  the  carrying  on  of  warfare  far  behind  the  lines 
of  the  armies.  Property  has  been  destroyed  both  by  the  ex- 
plosion resulting  from  the  dropping  of  bombs,  and  by  the  result- 
ing fires  which  these  explosions  have  caused.  The  use  of  the 
submarine,  as  well  as  the  airplane,  has  been  responsible  for  the 
writing  of  bombardment  insurance  without  any  adequate  data 
upon  which  to  base  rates  for  such  insurance.  Fire  insurance 
charges  from  their  very  nature  have  never  been  as  scientifically 
determined  as  life  insurance  rates.  Even  in  times  of  peace  there 
are  so  many  unknown  and  fluctuating  factors  which  affect  the 
rate  that  much  has  been  left  to  judgment  and  guess  in  arriving 
at  a  charge.  The  fire  rate  represents  an  effort  to  arrive  at  a 
price  for  a  service,  the  cost  of  which  can  not  be  known  at  the 
time  the  service  is  sold.  Whether  the  price  was  too  high  or 
too  low,  only  the  future  experience  could  disclose.  The  risk 
element  is  therefore  always  present  in  the  fire  rate,  and  in  time 
of  war,  when  new  hazards  are  introduced  and  old  hazards 
changed,  this  risk  is  enormously  increased. 

Attention  may  be  directed  to  some  of  the  changed  hazards  in 
addition  to  the  new  ones  already  suggested,  or  others  which  are 
apparent. 

New  Industrial  Hazards 

There  is  a  marked  increase  in  the  hazard  incident  to  the 
operation  of  manufacturing  and  mercantile  concerns.  Industrial 
plants  in  most  of  the  nations  are  being  operated  at  a  feverish 
rate.  Machines  are  being  run  continuously  and  at  a  high  rate 
of  speed.  Repairs  are  postponed  beyond  the  normal  period. 
Bearings  become  heated,  and  in  many  other  ways  the  fire  hazard 
incident  to  the  operation  of  machinery  is  increased.  Buildings 
are  hastily  erected  with  consequent  less  attention  given  to  fire 
protective  construction.  Electric  installations  and  other  lighting 
and  heating  devices  are  less  carefully  installed. 

Goods  are  being  produced  in  great  volume  at  a  rapid  rate. 


EFFECT   ON    FIRE   INSURANCE  209 

They  are  stored  and  handled  less  carefully.  Combustible  ma- 
terial, either  in  the  form  of  finished  product  or  as  waste  ma- 
terial, accumulates  and  exposes  buildings  and  other  goods  to 
destruction  by  fire.  Explosives  are  produced  in  the  greatest 
volume  ever  known  to  the  world,  and  their  storage  and  trans- 
portation continually  exposes  other  property  to  destruction. 

The  demand  for  labor  and  the  withdrawal  of  many  factory 
workers  for  service  in  the  armies  and  navies  have  brought  into 
the  industrial  plants  many  employes  who  are  not  trained  in  the 
use  of  tools  or  material. 

Moral  Hazards 

In  addition,  in  every  nation  at  war  there  are  those  who  are 
opposed  to  the  war,  and,  either  as  actual  enemies  of  the  nation 
or  as  deluded  opponents  of  the  present  economic  order,  they 
deliberately  set  fire  to  property.  Large  numbers  of  prisoners 
have  been  captured  by  each  nation  and  these,  too,  increase  to  a 
slight  degree  the  fire  hazard. 

With  this  pressure  for  product  and  business  under  which 
industrial  plants  and  mercantile  concerns  are  operating,  there 
is  less  care  given  to  the  operation  of  the  plant.  Sprinkler  sys- 
tems, fire-alarm  systems  and  watchmen  service  are  likely  to  be 
less  efficient,  because  of  less  frequent  inspection,  lack  of  repairs, 
change  in  personnel  of  the  inspectors  and  watchmen,  and  other 
contributing  causes. 

There  is  also,  doubtless,  a  marked  increase  in  the  moral 
hazard. 

It  is  pointed  ofit  that  even  here  in  the  United  States,  rich  and  populous 
as  we  are,  the  necessities  of  the  war  will  inevitably  compel  a  far  reaching 
readjustment  of  our  industrial  forces,  implying  great  increases  in  certain 
industries  and  corresponding  declines  in  other  industries ;  while  new  duties, 
partly  moral  and  partly  economic,  for  the  members  of  society  as  a  whole 
will  alter  the  emphasis  of  production  and  distribution  for  all  manner  of 
branches  of  commerce.  It  must  be  anticipated  that  the  war  would  speedily 
bring  about  a  more  or  less  severe  depression  in  all  the  trades  known  as 
luxury  trades — that  is,  those  trades  which  in  normal  times  supply  the 
community   with   products   and   articles   not   strictly   necessary   to   life,   but 


2IO  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

largely  used  for  purposes  of  convenience  or  comfort  when  the  mass  of  the 
population  is  normally  prosperous  and  free  from  the  strains  and  apprehen- 
sions of  war.  However  loudly  the  producers  and  dispensers  of  products 
and  articles  of  this  kind  might  argue  about  the  necessity  of  "business  as 
usual,"  it  would  be  found  that  people  in  general  felt  more  and  more  a  cer- 
tain impropriety  in  supplying  themselves  with  anything  savoring  of  the  lux- 
urious or  the  unnecessary.  The  shelves  of  merchants  might  be  piled  with 
goods  intended  to  meet  the  normal  taste  and  demand  of  the  public  for  the 
things  that  adorn  life,  rather  than  merely  maintain  it;  but  it  would  be  seen 
that  the  public  would  quickly  become  indifferent  to  these  goods — and,  in 
fact,  would  soon  look  with  disapproval  upon  the  purchase  of  them — no  mat- 
ter what  hardships  might  be  entailed  for  the  merchants  by  reason  of  this 
abrupt  change  in  their  custom.  War  has  always  in  the  past  brought  with 
it  very  violent  dislocations  of  the  prices  of  goods  and  services,  both  in  an 
absolute  sense  and  as  a  matter  of  relativity  among  the  various  groups  and 
classes  in  the  community.  Unless  the  strongest  measures  of  public  authority 
are  employed,  war  is  the  greatest  of  all  influences  in  the  direction  of  dis- 
parities of  fortune  among  individuals.  For  some  it  means  prosperity  of  the 
most  extravagant  kind ;  for  others  the  direst  economic  distress.  These  sud- 
denly developed  inequalities  are  of  course  reflected  in  the  vicissitudes  of 
businesses,  whether  productive  or  distributive,  whether  wholesale  or  retail; 
some  prosper  amazingly,  while  others  go  more  or  less  rapidly  to  the  wall. 

Perhaps  many  have  not  thought  of  these  characteristic  incidents  of  war 
from  the  point  of  view  of  their  effect  in  the  field  of  fire  underwriting.  The 
tendency  of  these,  as  of  all  violent  changes  in  business  conditions,  is  to  bring 
about  an  almost  immediate  enhancement  of  one  of  the  chief  factors  which 
the  fire  underwriter  has  to  take  into  account,  the  so-called  "  moral  hazard." 
It  is  a  general  rule  that  the  factor  of  "  moral  hazard  "  in  fire  insurance  is 
at  its  lowest  when  the  inter-relations  of  all  the  industries  and  all  the 
branches  of  trade,  one  with  another,  are  most  regular,  even  and  normal — 
in  other  words,  when  reasonable  prosperity  prevails  throughout  the  entire 
fabric  of  business ;  when  sharp  inequalities  and  disparities  between  economic 
group  and  group,  class  and  class,  do  not  obtain ;  and  when  the  unprecedented 
successes  of  some  are  not  matched  by  the  intolerable  losses  of  others.  Impa- 
tience of  severe  business  disadvantage,  in  contrast  with  visible  business 
advantage  of  a  speculative  kind,  is  the  great  breeder  of  "  moral  hazards." 

It  scarcely  needs  saying  that  fire  underwriters  in  the  United  States  are 
fully  aware  of  the  dangers  to  themselves  inherent  in  the  conditions  just  set 
forth.  Notes  of  warning  on  the  subject  are  being  heard  from  many  direc- 
tions, and  all  the  field  representatives  of  the  fire  insurance  companies  are 
being  urged  to  unusual  watchfulness  lest  the  rising  "  moral  hazard "  of  the 
groups  of  industries  and  businesses  unfavorably  affected  by  the  war  influ- 
ences result  in  disproportionate  losses  to  the  underwriters.' 

'  The  Economic  World,  n.  s.,  vol.  xiv,  No.  i,  p.  20. 


effect  on  fire  insurance  211 

Difficulty  in  Increasing  Rates 

Increased  hazards  have  not  been  the  only  way  in  which  the 
business  of  fire  insurance  has  been  affected.  Like  all  other 
forms  of  insurance,  and  indeed  most  kinds  of  business,  there 
has  been  a  marked  increase  in  the  expenses  of  transacting  the 
business,  but  with  this  important  difference :  in  most  of  the 
ordinary  businesses  there  has  been  an  increase  in  the  price  of 
their  product  which  has  equaled  or  exceeded  this  increased 
expense  of  doing  business;  the  price  of  most  products  lends  itself 
to  adjustments  with  comparative  ease  when  conditions  of  pro- 
duction change;  but  this  is  not  true  with  the  fire  insurance  rate. 
This  insurance  price  is  often  a  result  of  legislative  direction,  or 
at  least  state  supervision,  and,  in  addition,  its  very  character 
and  method  of  determination  on  the  part  of  insurance  companies 
tend  to  make  the  rate  a  relatively  stable  one.  Opposition  from 
various  sources  is  always  met  when  the  fire  insurance  companies 
endeavor  to  increase  rates  on  any  class  of  property,  and  not 
infrequently  is  it  easier  as  a  practical  method  of  procedure  for 
the  companies  to  continue  an  unduly  high  rate  on  certain  classes 
of  property  to  make  up  for  the  unduly  low  rates  on  other  classes 
of  property,  rather  than  to  adjust  rates  on  different  classes  of 
property. 

Increase  in  Operating  Expenses 

The  increased  expenses  of  fire  insurance  companies,  in  addi- 
tion to  that  caused  by  the  increased  fire  hazard,  are  due  to  the 
following  causes,  among  others. 

Higher  wages  must  now  be  paid,  and  not  infrequently  for  a 
lower  grade  of  service.  Many  office  and  field  men  have  been 
called  into  the  national  service  and  their  places  have  been  taken 
by  less  well  trained  men  who  not  only  are  not  able  to  render 
as  efficient  service,  but  are  also  in  position  to  demand  higher 
wages.  These  new  men  require  more  supervision,  and  thus  to 
transact  an  equal  volume  of  business  a  larger  amount  of  service 


212  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

would  be  required,  making  the  unit  cost  of  the  business  tend  to 
a  higher  level. 

Increased  taxes  have  been  laid  on  the  fire  insurance  business. 
Not  only  has  the  direct  tax  on  the  business  itself  been  increased, 
but  other  increased  taxes,  such  as  higher  postage  rates,  have 
affected  the  business.  Nor  is  it  possible,  as  in  many  other  busi- 
nesses, to  shift  these  increased  taxes  to  the  consumer — the  policy- 
holder. This  is  due  in  part  to  the  nature  of  the  business,  and 
in  part  to  the  character  of  competition  among  the  companies  and 
the  legislative  regulation  of  fire  insurance. 

The  depreciation  of  securities  has  been  discussed  in  connection 
with  life  and  marine  insurance.  Fire  insurance  has  been  affected 
in  a  similar  manner,  and  in  many  countries  even  more  seriously, 
since  such  companies  are  very  often  large  holders  of  stocks,  as 
well  as  of  bonds. 

Reinsurance 

One  of  the  most  important  readjustments  in  fire  insurance 
which  have  been  occasioned  by  the  war  is  that  connected  with 
reinsurance.  Reinsurance  in  fire  insurance  is  an  integral  and 
necessary  part  of  the  business.  A  fire  insurance  company  of 
any  considerable  size  is  having  continually  offered  to  it  an  amount 
of  insurance  on  a  single  property  or  on  different  properties 
within  a  limited  area  which  it  can  not  afford  to  carry,  because 
of  the  heavy  losses  which  would  be  entailed  in  case  of  a  fire 
in  this  district  of  congested  values.  The  companies,  therefore, 
make  a  practice  of  insuring  a  part  of  the  risk  in  other  insurance 
companies.  So  important  has  this  business  of  reinsurance  be- 
come that  companies  have  been  organized  which  do  either  ex- 
clusively or  primarily  a  reinsurance  business.  This  phase  of  the 
fire  insurance  business  has  developed  so  rapidly  during  the  past 
several  decades,  that  the  reinsurance  business  has  become  inter- 
nationalized; that  is  to  say,  reinsurance  organizations  were  found 
in  the  European  nations,  especially  in  Germany  and  Austria, 
which  had  on  their  books  risks  in  all  the  leading  nations  of  the 
world. 


EFFECT   ON    FIRE   INSURANCE  213 

The  position  of  the  continental  European  reinsurance  business, 
especially  with  reference  to  the  German  companies  of  this  char- 
acter, is  described  by  a  writer  as  follows : 

Official  German  statistics  and  reliable  private  statistics  regarding  European 
reinsurance  business  establish  the  following  facts : 

At  the  close  of  1915  there  were  in  Europe  143  companies  specializing  in 
reinsurance  or  transacting  it  as  accessory  to  their  other  business.  Their 
capital  was  686,000,000  francs;  their  reserves  were  2,190,000,000  francs,  and 
their  annual  premium  income  was  1,639,000,000  francs. 

There  were  fifty-eight  German  and  Austrian  reinsurance  companies,  with 
a  capital  of  263,000,000  francs,  reserves  of  1,224,000,000  francs,  and  an  annual 
premium  income  of  776,000,000  francs.  Consequently  they  dominated  all  the 
other  European  reinsurance  companies  combined. 

Russia  occupied  an  important  position  with  nine  companies  which  had  a 
capital  of  67,000,000  francs,  reserves  of  563,000,000  francs,  and  a  premium 
income  of  351,000,000  francs. 

Scandinavia  came  next  with  twenty-six  companies  which  had  a  capital  of 
176,000,000  francs,  reserves  of  106,000,000  francs,  and  a  premium  income  of 
220,000,000  francs. 

The  Latin  countries  had  only  a  small  number  of  old  and  important  reinsur- 
ance companies. 

England,  the  cradle  of  insurance,  a  country  which  possesses  the  largest 
number  and  the  most  powerful  direct  insurance  companies  of  the  whole 
world,  had  not  more  than  three  reinsurance  companies  of  any  importance 
out  of  a  total  of  twelve  transacting  this  business. 

In  spite  of  the  present  war  the  amount  of  the  premium  income  for  1915 
of  the  German  reinsurance  companies  is  only  67,000,000  francs  less  than  that 
of  1913  before  the  war.  The  premiums  retroceded  are  only  40,000,000  francs 
less  and  the  losses  29,000,000  francs  less.  As  a  result  of  their  operations 
they  were  enabled  to  distribute  to  their  shareholders  2,392,182  marks  more 
than  in  1913,  and  to  increase  their  reserves  by  the  considerable  sum  of 
103,000,000  marks  in  two  years. 

During  the  seven  years,  from  1909  to  191S,  the  German  reinsurance  com- 
panies received  a  total  of  3,219,140,146  marks  in  premiums,  and  their  total 
profits  have  been  142,538,166  francs  during  this  period  against  an  insignifi- 
cant loss  of  32,405  francs.  Not  a  single  company  has  made  a  loss  during  the 
last  four  years. 

The  predominance  of  German  reinsurance  companies  in  Europe  is  directly 
due  to  the  foregoing  facts. 

In  considering  the  position  it  is  well  also  to  bear  in  mind  the  following 
points : 

In  Russia,  German  reinsurance  companies  exercised  a  strict  control  over 
the  companies  of  that  country,  a  control  well  proved  by  the  fact  that  before 
the  present  war  the  books  of  the  Russian  companies  were  kept  in  the  Ger- 
man language  and  their  balance  sheets  were  printed  in  German. 


214  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

German  companies  exercised  their  influence  over  a  large  number  of  rein- 
surance companies  in  other  European  countries. 

They  extended  their  operations  over  all  parts  of  the  world. 

From  these  facts  and  considerations  the  following  undeniable  conclusion 
is  reached :  Germans  possessed  before  the  present  war  practically  a  monopoly 
of  reinsurance  in  the  world  and  gained  large  profits  from  it. 

To  what  is  this  due? 

We  think  that  this  state  of  things  may  be  attributed  to  three  prime  causes, 
which  are :  the  initiative  of  the  German  companies,  their  activity  and  the 
support  of  their  government. 

Above  all,  the  Germans  had  grasped  the  fact  that  reinsurance  was  essen- 
tially an  international  business.  Just  like  direct  insurance,  it  can  only  exist 
by  the  utmost  division  of  risks — that  is  to  say,  by  the  German  reinsurer  pass- 
ing on  to  other  reinsurance  companies  (by  way  of  retrocession)  all  such 
portions  of  the  sums  accepted  by  it  from  direct  companies  on  any  risks  as 
may  exceed  the  amount  it  desires  to  retain  for  its  own  account  on  the  risk 
concerned  (i.e.,  its  "surpluses").  «. 

These  retrocessions  are  made  chiefly,  and  necessarily  so,  with  foreign  com- 
panies. 

Let  us  suppose  that  a  reinsurance  company  of  a  certain  country  suc- 
ceeds in  obtaining  a  large  share  of  the  reinsurances  of  that  country.  It 
follows  that  it  will  receive  from  the  various  direct  companies  with  which  it 
deals  a  large  number  of  reinsurances  applying  to  the  same  risks  and  will 
be  guaranteeing  enormous  sums  on  large  industrial  or  commercial  risks  or 
on  groups  of  these  risks.  If  it  retains  for  its  own  account  all  these  rein- 
surances there  will  be  in  case  of  loss  certain  ruin.  It  must,  therefore, 
arrange  to  pass  on  its  surpluses,  but  it  can  not  so  arrange  with  other  rein- 
surance companies  of  the  same  country  which  are  themselves  already  inter- 
ested in  the  identical  risks,  and  it  must  consequently  come  to  an  under- 
standing with  foreign  companies. 

This  principle  the  German  grasped  and  put  into  practice,  and  that  is  whyv 
one  finds  that  of  the  599,000,000  francs  premium  income  received  by  their 
insurance  companies  in  1915  no  less  than  245,000,000  francs — that  is,  about 
40  per  cent — was  passed  on  to  other  reinsurance  companies  (retroceded). 

To  retrocede  in  the  manner  described  was  a  necessity,  but  to  recover  an 
equivalent  while  arranging  this  retrocession  was  a  clever  move,  and  German 
reinsurers  did  this  on  a  considerable  scale  by  arranging  reciprocal  retroces- 
sion contracts  with  reinsurers  of  other  countries  or  by  acquiring  an  interest 
in  insurance  and  reinsurance  companies  of  other  countries.  These  last  men- 
tioned companies  became  German  owned,  but,  by  retaining  their  native  name 
and  appearance,  served  at  one  and  the  same  time  both  as  overflow  shoots  for 
the  German  reinsurance  companies  and  as  effective  producing  agencies  for 
them.    We  could  quote  a  great  many  examples  of  this. 

In  addition  we  find  that,  before  the  present  war,  in  France  as  well  as  in 
Russia,  England,  Italy,  Switzerland  and  Bulgaria  (to  cite  only  those  coun- 
tries), a  number  of  direct  and  reinsurance  companies  were  controlled  within 
narrow  limits  by  German  reinsurance  companies.  This  was  certainly  an 
excellent  means  for  the  latter  to  develop  their  business. 


EFFECT   ON    FIRE   INSURANCE  215 

Retrocession  is  such  a  great  necessity  that  reinsurance  companies  which 
achieved  some  importance  felt  the  need  of  creating  subsidiary  companies 
either  at  home  or  abroad.  In  this  way  the  Koelnische  of  Cologne  has  the 
Minerva  of  the  same  city  as  a  daughter  company,  the  very  important  Swiss 
Reinsurance  Company  has  the  Prudential. 

To  the  clever  initiative  of  the  German  managers  must  be  added  their 
activity.  Every  well  informed  reinsurance  man  knew  that  these  managers 
never  hesitated  to  inconvenience  themselves  personally  in  order  to  visit  the 
most  distant  countries,  such  as  Japan,  China,  North  and  South  America,  for 
the  purpose  of  establishing  representatives,  creating  branches,  making  agree- 
ments and  transacting  business  there. 

It  is  common  knowledge  that  the  German  Government  effectively  supported 
its  people  in  all  their  commercial,  industrial  and  financial  undertakings 
abroad.  Not  satisfied  with  that,  and  particularly  in  reference  to  German 
insurance  and  reinsurance,  the  government  in  Berlin  ably  seconded  their 
operations  by  establishing  and  publishing  official  researches  and  statistics  on 
insurance  and  reinsurance  in  Germany  and  other  countries,  such  as  one 
would  look  for  in  vain  elsewhere.  These  publications  constituted  a  complete 
synopsis  of  all  insurance  and  reinsurance  matters :  researches,  reports,  sta- 
tistics— their  utility  is  incontrovertible. 

It  is  to  these  combined  causes  that  one  must  ascribe  the  important  devel- 
opment that  German  insurance  and  reinsurance  has  enjoyed  since  1870  as 
much  in  Germany  as  abroad. 

Before  the  present  war  French  companies,  like  those  of  many  other  coun- 
tries, were  simply  tributary  to  German  reinsurance  companies.  They  con- 
tributed to  the  success  of  these  companies  by  giving  them  about  100,000,000 
francs  in  premiums  annually,  which  was  partly  recovered,  it  is  true,  by  retro- 
cessions which  these  German  companies  passed  back  to  certain  French  com- 
panies. 

To  escape  from  this  tribute  the  Allied  countries  have  only  one  way  open 
to  them,  which  consists  in  establishing  in  each  of  these  countries  reinsurance 
companies  sufficient  in  number  to  replace  the  German  companies.  Left  to 
themselves,  indeed,  private  corporations  of  this  class  may  enter  on  and  sus- 
tain a  successful  struggle  against  German  insurance  companies  by  satisfy- 
ing first  of  all  the  needs  of  their  own  countries,  by  organizing  the  necessary 
retrocessions  with  similar  corporations  in  Allied  or  friendly  neutral  coun- 
tries, and  by  carrying  the  attack  into  other  countries  where  German  com- 
panies still  exercise,  as  a  matter  of  fact,  their  supremacy. 

To  require  such  services  from  a  state  institution  appears  to  be  impossible. 
At  the  most  an  institution  of  this  class  might  to  some  extent  fulfil  the 
requirements  of  its  own  country.  The  retrocession  to  foreign  companies  and 
the  acceptance  of  reinsurances  of  its  own  country  or  of  foreign  retroces- 
sions would  transform  it,  ipso  facto,  into  an  ordinary  commercial  company, 
and  would  oblige  it  in  consequence  either  to  limit  its  liability  by  refusing  to 
accept  more  than  a  part  of  the  reinsurances  necessary  to  its  country,  or  in 
accepting  and  retaining  them  all  to  expose  itself  to  the  possibility  of  suc- 
cumbing lamentably  under  a  mass  of  accumulated  risks. 


2l6  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

A  state  institution  could  not  in  any  case  take  part  in  the  struggle  which 
must  necessarily  be  entered  upon  against  the  German  reinsurance  companies 
in  every  foreign  country,  and  thus  it  would  assist  in  conserving  for  the 
latter  the  large  profits  which  they  receive  from  this  business  owing  to  the 
monopoly  which  they  possess  there. 

In  France,  during  1916,  three  new  companies  were  formed.  In  Russia  the 
early  formation  of  a  new  reinsurance  company  is  announced,  although  this 
industry  is  already  prosperous  there,  and  the  existing  companies  appear  to 
have  made  the  necessary  arrangements  to  escape  from  the  German  yoke,  for 
they  now  print  their  accounts  in  French  or  English,  and  we  know  that  in 
England  eminent  insurance  men  have  quite  decided  to  assist  the  movement. 

Among  friendly  neutrals  the  same  disposition  is  clearly  shown.  It  is  very 
remarkable  that  in  the  small  but  energetic  country  of  Denmark  the  number 
of  reinsurance  companies  was  increased  from  six  in  1914  to  eleven  in  1916, 
their  capital  from  27,000,000  kroner  to  62,000,000  kroner,  and  their  annual 
premiums  from  23,000,000  kroner  to  60,000,000  kroner,  or  more  than  100,- 
000,000  francs,  exceeding  by  more  than  three  times  the  total  premiums 
received  in  191 5  by  French  reinsurance  companies  when  German  reinsurance 
companies  were  not  able  to  intervene.' 

This  business  of  reinsurance  by  companies  domiciled  in  enemy- 
countries  or  in  countries  allies  of  the  enemy  has  been  prohibited, 
thus  placing  upon  the  domestic  companies  or  those  of  friendly 
nations  the  necessity  of  assuming  this  large  business  of  re- 
insurance. 

It  should  be  understood  in  connection  with  this  discussion  of 
the  general  effects  of  war  on  fire  insurance,  that  the  companies 
are  protected  to  a  certain  extent  against  unfavorable  results  by 
the  terms  of  the  policy  contract.  The  standard  policy  used  in 
the  United  States  has  a  clause  a  part  of  which  reads  as  follows : 
"  This  company  shall  not  be  liable  for  loss  caused  directly  or 
indirectly  by  invasion,  riot,  civil  war  or  commotion  or  military 
or  usurped  power  or  by  order  of  any  civil  authority."  How 
literally  this  clause  will  be  applied  during  this  great  war,  it 
remains  yet  to  be  known. 

'  Le  Monitcur  des  Assurances,  translated  by  the  Post  Magazine  and  Insur- 
ance Monitor,  London, 


effect  on  fire  insurance  21/ 

Bombardment  and  Airplane  Insurance 

Attention  may  now  be  directed  to  a  survey  of  the  effect  of 
the  war  on  fire  insurance  in  some  of  the  leading  nations  engaged 
in  the  struggle.  Reference  has  already  been  made  to  the  estab- 
lishment of  new  forms  of  property  insurance,  such  as  bombard- 
ment and  airplane  insurance.  These  are  not,  it  is  true,  strictly 
forms  of  fire  insurance,  but  since  they  are  forms  of  property 
insurance  closely  related  to  fire  insurance,  a  brief  description  of 
them  may  be  given. 

Airplane  damage  insurance  is  for  the  covering  of  damage 
caused  by  enemy  airplane  attacks  through  bombs,  etc.  The  suc- 
cessful German  attacks  on  England  caused  the  demand  for  this 
insurance.  To  be  sure  this  had  been  covered  in  the  spring  of 
1914  by  a  very  small  premium  through  the  London  Lloyd's. 
But  in  191 5  the  premium  rose.  The  English  public  insurance 
against  damage  by  enemy  airships  covers  the  loss  or  damage 
caused  by  airships  in  so  far  as  this  damage  is  not  covered  by 
the  usual  fire  insurance  policy. 

The  government  put  into  operation  a  scheme  for  compensation 
without  insurance  for  war  damage  due  to  air  raids  and  bom- 
bardments of  the  ports  of  Great  Britain.  The  plan  meets  the 
case  of  the  small  property  owner  by  providing  that  owners  of 
property  not  exceeding  £500  in  value  will  be  compensated  as 
from  September  i  last  without  fee.  The  household  effects  of 
a  very  large  number  of  persons  would  not  exceed  that  amount. 
Owners  of  property  of  values  exceeding  £500  will  be  com- 
pensated up  to  that  amount  without  premium,  provided  that 
all  value  in  excess  of  £500  is  insured  under  the  government 
insurance  scheme.  In  view  of  the  second  provision  set  out  in  the 
scheme  below,  it  may  be  well  to  recall  the  effect  of  the  wording 
of  what  is  known  as  the  average  clause.  Where  property  is 
not  fully  insured  and  a  loss  occurs,  it  is  usual  to  pay  the  same 
proportion  of  the  loss  as  the  amount  insured  bears  to  the  total 
value  of  the  property.  The  average  clause  does  not  apply,  as 
a  rule,  to  private  houses. 


2l8  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

When  the  state  scheme  for  the  insurance  of  property  was 
inaugurated  in  July,  191 5,  the  rate  for  private  houses  was  2s. 
on  the  hundred,  and  this  rate  was  continued  until  February  last, 
when  all  rates  were  reduced  by  50  per  cent,  subject  to  the 
minimum  premium  payable  in  respect  of  any  one  insurance  not 
being  below  2s.  on  the  hundred. 

The  following  are  the  detailed  provisions  of  the  scheme : 

1.  (a)  Owners  of  property  in  the  United  Kingdom  of  an 
aggregate  value  not  exceeding  £500  will  be  compensated  by  the 
government  in  respect  of  damage  or  destruction  of  any  such 
property  by  the  perils  coverable  by  the  government  aircraft  and 
bombardment  insurance  policy,  whether  the  property  be  insured 
under  the  government  insurance  scheme  or  not  so  insured  at  the 
time  of  its  damage  or  destruction. 

(b)  Owners  of  insurable  property  in  the  United  Kingdom  of 
an  aggregate  value  exceeding  £500  will  be  compensated  up  to 
that  amount  without  payment  of  premium  provided  that  all 
value  in  excess  of  £500  is  insured  under  the  government  insur- 
ance scheme. 

2.  If  the  property  of  an  owner  is  not  fully  insured  under 
the  government  insurance  scheme,  any  claim  under  this  com- 
pensation scheme,  as  well  as  under  any  government  policy,  will 
be  subject  to  average  inconformity  with  the  terms  and  con- 
ditions of  the  government  aircraft  insurance  policy  and  the  note 
thereto. 

3.  The  total  amount  payable  by  the  government  in  respect 
of  a  claim  will  be  discharged  under  any  government  policy  of 
insurance  in  force  at  the  time  of  the  damage  up  to  the  amount 
payable  under  such  policy,  and  the  balance,  if  any,  will  be  dis- 
charged under  this  compensation  scheme. 

4.  Owners  of  property  may  at  their  option  insure  the  whole 
value  of  their  property  under  the  government  aircraft  insur- 
ance scheme,  but  not  by  means  of  Post  Office  certificates,  which 
will  not  be  issued  in  future, 

5.  Compensation  will  be  limited  to  the  actual  damage  done, 
having  regard  to  the  condition  and  value  of  the  property  at  the 


EFFECT    ON    FIRE   INSURANCE  219 

time  of  the  damage,  and  will  be  devoted  to  making  good  the 
damage,  subject  to  any  conditions  and  exceptions  which  the  Air- 
raid Compensation  Committee  may  prescribe. 

6.  (a)  In  the  case  of  uninsured  property  immediate  notice 
must,  when  damage  occurs,  be  given  to  the  Air-raid  Compensa- 
tion Committee  or  their  agents. 

(b)  In  the  case  of  damage  to  property  insured  under  the 
government  aircraft  insurance  scheme  immediate  notice  must  be 
given  to  the  office  through  which  the  insurance  was  effected. 

7.  No  compensation  will  be  paid : 

(a)  In  respect  of  any  loss  recoverable  under  any  insurance. 

(b)  For  money,  securities,  stamps,  documents,  manuscripts  or 
books  of  account. 

(c)  For  consequential  loss  or  theft. 

(d)  For  any  expenses  incurred  in  preparing  or  supporting  a 
claim  on  the  government. 

(e)  For  fees  in  connection  with  reinstatement  of  damaged 
property. 

(f)  In  the  event  of  a  claim  being  fraudulent  in  any  respect. 

8.  In  no  circumstances  will  a  refund  of  premium  be  made  in. 
respect  of  any  insurance  that  may  have  been  effected  with  the 
government. 

9.  This  scheme  took  effect  as  from  September  i,  19 17. 

The  amount  of  premium  could  not  be  measured  according  to 
the  fire  premium  and  the  establishment  of  danger  zones  did  not 
suffice.  Five  classes  were  introduced  against  airships  and  bom- 
bardment : 

1.  Building  and  contents  (no  business). 

2.  All  other  buildings. 

3.  Agricultural  implements  and  dead  inventory. 

4.  Contents  of  buildings  except  in  classes  i  and  5. 

5.  Goods  in  docks  in  warehouses  on  the  road,  wood  in  the 
open,  oiltanks. 

The  Daily  Mail  introduced  a  "Zeppelin  Insurance"  in  191 5 
according  to  which  it  obligated  itself  to  pay  £200  for  every 
subscriber  killed  by  bombs,  £250  for  the  loss  of  two  limbs  or  both 


220  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

eyes,  £ioo  for  the  loss  of  one  eye  or  one  limb,  and  £2  per  week 
for  temporary  total  incapacitation.  Until  August,  19 15,  this 
paper  had  paid  316  claims. 

In  Germany  the  question  of  airship  damage  insurance  came 
up  after  May  2^,  1915,  after  the  French  air  attack  on  Ludwigs- 
hafen  and  Mannheim.  Previously  only  transported  goods  were 
so  insured.  The  union  of  the  German  private  fire  insurance 
companies  made  it  possible  to  cover  such  damage.  In  July,  191 5, 
the  Stuttgart-Berlin  and  the  Frankfort-General  undertook  the 
insurance  for  damage  through  airships.  The  premiums  hold 
three  months.    Germany  is  divided  into  three  danger  zones. 

Fire  Insurance  in  England 

In  England  the  fire  insurance  business  has  long  occupied  an 
important  position,  not  only  in  relation  to  property  values  in 
that  country,  but  also  to  the  business  of  fire  insurance  in  many 
other  countries,  especially  to  that  in  the  United  States.  These 
English  fire  companies  operate  either  as  direct  writers  or  as  rein- 
surers in  many  nations.  They  have  agencies  all  over  the  world, 
and  thus  have  long  since  been  international  in  their  operations. 

The  character  of  these  companies  and  their  method  of  opera- 
tion have  been  such  as  to  secure  the  confidence  of  property 
holders  in  all  nations.  Their  position  is  described  by  a  writer 
as  follows :  ^ 

Insurance  shares  in  England,  especially  those  of  the  large  composite  com- 
panies, have  always  been  popular  investments  for  good  reasons.  Originally 
these  companies  were  relying  for  their  mainstay  upon  fire  insurance.  But 
their  ambition  and  progressiveness  have,  in  the  course  of  the  last  ten  or 
fifteen  years,  extended  their  operations,  so  that  now  nearly  every  important 
insurance  company  in  this  country  transacts  not  only  fire  (and  generally 
life)  business,  but  also  accident  and  marine.  From  a  shareholder's  point  of 
view,  the  life  business  is  quite  subsidiary.  It  does  not  depend  upon  what  is 
known  as  "  underwriting,"  and  the  resultant  modicum  of  profit  for  the  share- 
holders is,  on  an  ordinary  sized  business,  quite  small  as  compared  with  the 
possible  profits  from  the  other  more  fluctuating,  but  frequently  very  remu- 
nerative, section. 

'  The  Economist  (London),  vol.  Ixxxi,  September  18,  1915,  p.  429. 


EFFECT   ON    FIRE   INSURANCE  221 


Finances  of  English  Companies 

It  is  probable  that,  of  all  the  branches  of  industry  in  this  country  trans- 
acted upon  a  large  and  public  scale,  none  has  been  better  managed  or  better 
financed  than  that  under  consideration.  This  has  been  due  not  only  to  the 
expert  knowledge  brought  to  bear,  but  also  to  the  admirable  way  in  which 
the  companies'  resources  have  been  husbanded.  Consistently  from  year  to 
year  they  have,  in  the  main,  taken  from  their  profits  but  a  small,  and  even 
trifling,  proportion  to  pay  the  dividend.  It  would  seem  as  if,  with  common 
consent,  they  had  made  up  their  minds  never  to  increase  the  dividend  unless 
they  could  be  virtually  certain  to  maintain  it,  whatever  happened.  The  large 
bulk  of  the  profits  has  thus  been  regularly  passed  to  the  reserves.  Indeed, 
notwithstanding  the  great  prosperity  which  these  companies  have  experi- 
enced during  the  last  ten  or  fifteen  years,  and,  therefore,  their  consequent 
greater  financial  strength,  they  have,  as  a  general  rule,  so  pursued  this  prin- 
ciple of  putting  by  most  of  the  profits  that,  in  some  cases,  the  interest  is 
now  actually  more  than  sufficient  to  pay  the  dividend  without  any  profits 
whatever  being  taken  from  the  fire,  marine  or  accident  departments.  It  was 
this  strength — since  greatly  emphasized — which  enabled  these  companies  in 
1906  to  bear  the  colossal  San  Francisco  conflagration  with  equanimity,  and 
to  go  on  paying,  and  shortly  after  actually  increasing,  the  dividends  which 
the  shareholders  had  been  receiving. 

This,  then,  was  the  position  of  the  composite  companies  at  the  end  of  July, 
1914,  when  the  war  clouds  were  gathering.  The  table  on  page  222  contrasts 
the  market  prices  then  and  now : 

In  column  i  is  shown  the  draft  upon  underwriting,  that  is  to  say,  the  amount 
required  from  the  profits  of  the  "  underwriting "  departments  of  each  com- 
pany after  deducting  from  the  dividend  paid  the  interest  and  the  life 
profits  (if  any).  Columns  2,  (a),  (b)  and  (c),  show  the  prices  and  the 
yields  as  at  July  30,  1914,  just  before  the  war  clouds  broke,  and  columns 
3,  (a),  (b)  and  (c),  give  the  same  data  as  at  August  31,  1915,  that  is 
thirteen  months  afterward.  The  yields  have  been  calculated  gross  and  net — 
the  net,  in  the  case  of  July  30,  1914,  being  less  income  tax  at  the  rate  of 
IS.  3d.  in  the  pound,  and  at  August  31,  1915,  less  income  tax  at  the  rate  of 
2S.  6d.  in  the  pound. 

It  will  be  seen  that  the  fall  in  market  values  during  the  twelve  months 
averages  rather  over  16  per  cent,  and  that,  consequently,  even  after  provid- 
ing for  the  higher  income  tax,  the  average  net  yield  to  a  shareholder  is  at 
the  present  moment  £5  6s.  lod.  on  the  hundred,  as  compared  with  the  former 
£4  I2S.  8d.  on  the  hundred.  If  we  go  back  still  further  to,  say,  1909,  the  net 
yield  was  then  £4  7s.  9d.  on  the  hundred.  Prima  facie  a  clear  5%  per  cent 
yield  upon  such  a  class  of  security,  which  has  for  so  many  years  shown 
unwavering  progress,  is  highly  satisfactory.  There  are,  however,  two  con- 
siderations to  be  borne  in  mind :  first,  that  we  have  probably  not  reached  the 
limit  of  the  income  tax,  and,  second,  that,  in  most  cases,  insurance  companies* 
shares  are  subject  to  "  uncalled  liability." 


222 


EFFECTS    OF   THE   WAR   UPON    INSURANCE 


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EFFECT   ON    FIRE   INSURANCE  223 

The  remaining  consideration  is  how  the  companies  have  in 
their  operations  been  affected  by  the  war.  It  must  be  borne  in 
mind  that  these  operations  are  worldwide,  and  that,  in  the  main, 
rather  more  than  half  of  their  revenue  comes  from  neutral 
countries,  i.e.,  those  countries  which  are  not  involved  in  the  war. 
The  businesses  and  transactions  with  German  and  Austrian  com- 
panies were  summarily  cut  off  in  19 14,  and  the  result  was  prob- 
ably largely,  if  not  completely,  reflected  in  the  accounts  of  the 
companies  for  that  year,  in  which,  after  all,  appreciable  profits 
were  made,  thus  further  enhancing  the  general  stability.  This, 
notwithstanding  that  the  companies  had  also  to  face  and  de^l 
with  the  depreciation  in  the  value  of  the  shareholders'  invest- 
ments. 

Their  1914  position  may  be  briefly  epitomized  in  this  way: 

% 

An  aggregate   (real)   underwriting  profit  of 7.74 

Depreciation  on  shareholders  investment  provided  for 4.56 

Required,  in  addition  to  interest  and  life  profits,  to  pay  dividends. .     098 
Leaving  to  enhance  the  reserves 2.20 

7-74 

The  results  of  the  early  period  thus  described  gave  no  guar- 
antee of  what  would  later  occur,  but  the  results  for  the  year 
1915  and  for  such  part  of  the  year  1917  for  which  statistics 
are  available  seem  to  indicate  that  these  strong  British  fire  insur- 
ance companies  are  in  an  excellent  position  to  withstand  the 
tests  of  war  times. 

A  writer,  reviewing  the  year  of  1916  in  British  fire  insurance, 
states  the  situation  as  follows :  ^ 

We  are  now  able  to  give  a  general  survey  of  the  results  achieved  by  the 
British  fire  insurance  companies  during  last  year,  and  to  show  how  they 
have  made  use  of  their  increased  resources  to  strengthen  their  position. 
There  has  not  been  in  fire  insurance  that  almost  bewildering  expansion  in 
premiums  experienced  by  the  marine  insurance  companies.  Most  of  the  com- 
panies in  our  list  have  increased  their  fire  premiums,  but  scarcely  to  the 
extent  which  might  have  been  expected.  Both  private  and  commercial 
policyholders  have  been  slow  to  realize  that  the  insured  values  of  the  past 

*  The  Economist  (London),  June  2,  1917. 


224  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

bear  little  relation  to  those  necessary  in  the  present,  when  the  prices  of  mate- 
rial, labor  and  manufactured  articles  have  so  greatly  advanced.  An  annual 
revision  is  now  urgent,  both  in  the  interests  of  policyholders,  who  need  to 
be  fully  covered,  and  in  those  of  the  companies  which  seek  to  protect  them. 
In  the  following  table  the  trading  surplus  has  been  calculated  in  each 
instance  by  taking  40  per  cent  of  the  premium  income  as  a  standard  reserve 
for  unexpired  risks.  Most  of  the  companies  adopt  this  basis  in  their 
accounts ;  it  has  become  the  recognized  standard,  and  in  cases  where  some 
other  percentage  has  been  officially  used  we  have  calculated  the  surplus  of 
underwriting  profit  by  the  40  per  cent  rule  so  as  to  provide  a  common  basis 
for  comparison.  A  great  many  companies  nowadays  do  fire  business,  but 
as  most  of  the  later  entrants  into  the  field  do  not  separate  their  fire  pre- 
miums from  those  of  their  accident  and  other  business,  we  have  confined 
our  attention  to  the  fire  offices  proper,  those  whose  range  of  operations  may 
be  said  to  cover  the  field  not  only  in  this  country,  but  in  America,  Canada, 
the  other  Dominions  and  elsewhere.  There  are  now,  by  the  expansion  of 
the  Royal  Exchange,  no  fewer  than  twelve  millionaire  fire  offictes ;  the  North 
British  exceeds  two  millions,  the  Liverpool  and  London  and  Globe  three  mil- 
lions and  the  Commercial  Union  and  Royal  overtop  the  four  million  mark. 
The  steady  progressive  advance  of  the  Commercial  Union,  partly  by  the  pur- 
chase of  other  companies  and  partly  by  its  own  expansion,  has  been  the 
most  striking  feature  of  the  past  ten  years.  It  is  now  second  only  to  the 
Royal  as  a  fire  office,  and  larger  than  any  other  composite  company  in  the 
premium  income  derived  from  its  multifarious  branches. 

Fire  Claims  Expenses  Trading 

Premiums 

Alliance     £1,369,159 

Atlas    1,152,861 

British  Law    124,466 

Caledonian    500,226 

Commercial  Union    4,025,942 

Guardian     674,804 

Liverpool  &  London  &  Globe.  3,263,109 

London  &  Lancashire 1,903,241 

London  Assurance    803,837 

Northern  1,435,520 

North    British     2,354,733 

Norwich  Union 1,292,779 

Phoenix    i,53i,873 

Royal     4,435,636 

Royal  Exchange    1,005,193 

Scottish  Union   841,722 

State     281,900 

Sun     1,532,349 

Yorkshire     482,924 

The  remarkable  figures  of  the  Alliance  will  attract  attention.  Upon  a  very 
moderate  premium  income  of  £1,369,159  it  has  produced  a  trading  profit  of 
£360,687,  or  26.4  per  cent  of  the  premiums.  No  other  company,  except  the 
small  British  Law,  with  its  very  special  business,  has  approached  this  rate 


Pet. 

Pet. 

Surplus 

Pet. 

35.3 

37-9 

£360,687 

26.4 

46.2 

36.7 

174,553 

15.2 

29.8 

47.1 

26,604 

21.4 

53.2 

37-3 

35,089 

7.0 

.SI  7 

35.8 

394,061 

g.8 

48.9 

36.8 

78,804 

117 

547 

35-1 

308,961 

9-5 

4«.9 

35-4 

222,532 

1 1.6 

45-6 

38.8 

89,531 

II. I 

50.2 

37-4 

132,178 

9.2 

52.2 

37.5 

161,113 

6.9 

55-5 

33.8 

169,788 

I3-I 

4«.9 

390 

155,532 

10. 1 

51-3 

35-9 

455,249 

10.3 

48.1 

39-4 

92,371 

9.2 

52.2 

35-9 

81,596 

97 

52.0 

36.7 

22,627 

8.0 

48.3 

377 

185,339 

12.1 

47.1 

377 

59,062 

12.2 

EFFECT   ON    FIRE   INSURANCE  22$ 

of  profit.  The  very  large  companies,  as  we  have  previously  pointed  out,  tend 
to  draw  near  to  one  another  in  average  results;  they  represent  the  world- 
wide market  rather  than  the  specially  selected  market.  Their  rate  of  profit 
for  last  year  ranges  from  9  to  12  per  cent,  averaging  about  that  figure  of 
10  per  cent,  which  is  regarded  as  a  sound,  steady  return,  taking  one  year 
with  another  and  one  country  with  another.  The  London  Assurance,  the 
most  successful  of  all  in  the  United  States,  is  less  conspicuous  in  the  present 
table,  with  its  profit  of  11. i  per  cent;  it  has  now  been  surpassed  by  the 
London  and  Lancashire,  the  Norwich  Union  and  the  Sun.  Taken  as  a  whole, 
1916  may  be  regarded  as  a  good  average  year,  less  profitable  than  was  1915, 
but  illustrative  of  the  sound,  careful  basis  upon  which  fire  insurance  opera- 
tions are  conducted. 

Interest, 
Net  (Less 

Interest  Depre- 
on  Debts)       ciation 

Alliance    £198,817         

Atlas    52,054  £39.159 

British   Law    15,547  I3,I94 

Caledonian    19.497  8,952 

Commercial  Union   . . .  317,316  191,953 

Guardian    76,267  34,891 

Liverpool  &  London  &  c    ,nfi  cQ  i 

Globe 233.094  |4g;^[ 

London  &  Lancashire.  84,234  50,000 

London  Assurance  . . .  101,314  20,410 

Northern    98,708  12,753 

North  British  (includ- 
ing Railway  Passen- 
gers and  Ocean)    . .  259,794  69,648 

Norwich   Union     97.2o6  183.258 

Phoenix     1 12,367  86,000 

Royal     311.215  500,000 

Royal  Exchange    82,371  60,000 

Scottish  Union    65,054  45.000 

State     10,068  5,000 

Sun    125,703  70.000 

Yorkshire     66,308  50,000 

*  Set  aside  as  Investment  Fluctuation  Fund. 

The  statistics  for  the  first  nine  months  of  1917  show  a  marked 
increase  in  fire  losses.  Up  to  September  30,  these  losses  aggre- 
gated £3,130,900  as  compared  with  £2,469,700  for  the  corre- 
sponding nine-month  period  of  1916.  These  statistics  indicate 
with  what  caution  predictions  must  be  made,  regarding  the  final 
effect  which  the  war  will  have  on  fire  insurance,  or,  for  that 
matter,  on  any  branch  of  insurance.  So  many  negative  and 
positive  factors  are  operating,  or  may  later  arise,  that  in  the 


Additions 

to  Funds 

Dividends 

£528,761 

£420,000  less  tax 

95,740 

68,200  net 

29,370 

23.248   " 

33.506 

20,021    " 

874,960 

383,500  less  tax 

47,221 

116,250  net 

166,931 

246,938   " 

298,726 

126.912   " 

544.137 

89.655    " 

163,936 

104,625   " 

314.768 

273.962   " 

415.434 

81,400  less  tax 

265,970 

169,142   "      " 

694,084 

319,498  net 

595.175 

82,606  less  tax 

225,614 

46,562  net 

32,362 

8,750   " 

102,607 

130,200  " 

495.536 

62,644  " 

226 


EFFECTS    OF   THE   WAR   UPON   INSURANCE 


business  of  insurance,  as  in  other  industrial,  political  and  social 
relations,  no  one  but  a  superficial  student  of  human  affairs 
permits  himself  to  dogmatize  with  respect  to  final  effects. 

Nevertheless,  the  unusually  stable  foundations  of  British  fire 
insurance  companies  and  their  not  decidedly  unfavorable  experi- 
ence up  to  the  present,  serve  to  keep  the  stocks  of  these  com- 
panies at  a  relatively  high  level. 

This  is  shown  by  the  monthly  quotations  on  their  stocks  for 
the  years  since  the  war  has  been  in  progress.  The  following 
table  shows  these  facts : 


British  Insurance  Stocks  * 

Aggregate  Value 
of  Shares  of  64 

1914                                        Insurance  Offices  Changes 

January    £86,266,787  +£3,996,980 

July     83,333,260  —2,933,527 

1915 

June    77,880,075  —5,453,185 

July    73,070,325  —4,809,750 

August    69,004.668  — 4,065,647 

September    ...  67,857,845  — 1,146,823 

October    68,530,982  -f-   673,137 

November    ...  69,846,051  4-i,3i5,ii9 

December    . . .  69,030,659  —   815,392 

1916 

January 72,373,344  +3,342,685 

February    72,636,387  +    263,043 

March   7i,i59,05i  —1,477,336 

April    72,091,767  +   932,716 

May     74,442,325  +2,350,558 

June     74,684,028  +   241,703 

July    75,834,314  +1,150,286 

August    17,171,^$^  +1,543,041 

September     . .  77,814,301  +   436,946 

October     77,663,036  —    151,265 

November    . . .  76,386,041  — 1,276,995 

December     ...  75,252,046  — i,ii3,99S 

1917 

.  January    73,767,971  —1,484,075 

February    71,867,935  — 1,900,036 

March     75,092,445  +3,224,510 

April     78,791,790  +3,699,344 

May     78,105,655  .  —   686,135 

June     79,522,570  +1,416,925 

July    85,043,095  +5,520,525 

August    84,824,009  —  219,086 

September    . . .  85,651,064  +   827,055 

October    88,641,207  +2,990,143 

^  The  Economist  (London),  June  2,  1917. 


Ratito  of  Values 
to  Jan.,  1914, 
Prices 
loo.o 
96.5 

90.2 

847 
80.0 

78.7 
79.4 
80.9 
80.0 

83.8 
84.2 
82.S 
83.6 
86.3 
86.5 
87.9 
89.6 
90.2 
90.0 
88.5 
87.2 

85.5 
83.3 
87.0 
91.3 
90.5 
92.2 

98.5 
98.3 
99.3    . 
102.7 


effect  on  fire  insurance  227 

Fire  Insurance  in  the  United  States 

The  United  States,  although  fortunately  far  removed  from 
the  actual  territory  of  conflict,  is  nevertheless  having  all  its 
lines  of  business  affected  by  the  war,  and  this  result  was  occur- 
ring even  before  the  entrance  of  the  nation  into  the  war.  Fire 
insurance  has  been  one  of  the  businesses  which  are  being  greatly 
disturbed  by  the  war.  There  are  a  number  of  special  reasons 
why  this  is  happening. 

In  the  first  place,  the  amount  of  fire  premiums  collected  in  the 
United  States  far  exceeds  that  of  any  other  nation,  and  with 
that  from  Canada  it  probably  exceeds  that  of  all  other  nations 
in  the  world. 

In  the  second  place,  the  business  of  fire  insurance  in  the 
United  States  is  not  controlled  by  the  federal  government,  but 
by  the  laws  of  the  different  states.  There  thus  results  a  great 
diversity  in  the  regulation  and  this  produces  a  great  complexity 
in  the  matter  of  rates.  Some  states  have  rating  boards,  some 
closely  supervise  the  rates  made  by  the  companies,  and  in  others 
a  wide  discretion  in  rate  making  is  permitted.  The  country  is 
of  such  great  extent,  and  so  many  different  kinds  of  property 
are  found  with  such  great  variety  in  climatic  conditions,  in 
materials  of  construction,  and  in  protective  fire  devices,  that 
standardization  and  stability  in  fire  insurance  have  been  impossi- 
ble to  secure.  Methods  of  determining  rates  differ  in  different 
sections  of  the  country,  and  along  with  the  lack  of  uniformity 
in  rates  there  is  a  certain  kind  of  inelasticity.  This  latter  char- 
acteristic is  a  logical  result  of  the  variety  in  regulation  and  the 
character  of  the  property  to  be  insured.  If  certain  classes  of 
property  bear  rates  which  produce  a  considerable  margin  of 
profit,  there  is  no  disposition  to  readjust  such  rates  in  the  absence 
of  complaint  from  these  property  owners,  inasmuch  as  the  com- 
pany or  companies  are  probably  at  the  same  time  receiving  rates 
on  other  classes  of  property  which  produce  little  or  no  margin  of 
profit. 

In  the  third  place,  partly  as  a  result  of  the  preceding  condi- 


228  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

tions,  and  partly  as  a  result  of  the  character  of  the  business 
organization  of  fire  insurance  in  the  United  States,  there  has 
resulted  excessive  and  violent  competition  among  the  companies 
for  business,  which,  taking  the  usual  form  of  rate  cutting,  has 
from  time  to  time  produced  a  condition  approximating  chaos. 

In  the  fourth  place,  the  United  States  has  had  the  ever- 
recurrent  fire  conflagrations  to  meet  in  its  fire  insurance  business. 
The  preceding  outline  of  conditions  and  other  well  known 
causes  has  made  the  business  of  fire  insurance  from  the  stand- 
point of  its  owners  and  managers  one  of  great  risk.  Some  com- 
panies have  shown  in  one  or  more  years  little  or  no  underwriting 
profit  and  many  companies  in  the  United  States  have  not  enjoyed 
the  underwriting  profit  which  has  been  made  by  many  of  the 
fire  insurance  companies  in  other  nations. 

The  war,  therefore,  introduced  a  disturbing  agency  into  a  con- 
dition already  complex.  Industrial  plants  in  this  country,  even 
before  the  entrance  of  the  United  States  into  the  war,  were 
operating  under  great  pressure  to  fill  the  large  war  orders  from 
the  nations  at  war,  and  when  this  nation  became  a  party  to  the 
contest  the  pressure  was  increased.  The  danger  of  fire  was  not 
only  increased  on  account  of  this  great  pressure  under  which 
industry  operated  for  the  reasons  already  discussed,  but  there 
was  the  additional  hazard  of  incendiary  fires.  Those  in  sym- 
pathy with  the  enemy  nations  and  others,  who  from  various 
causes  were  opposed  to  the  war,  have  been  responsible,  doubtless, 
for  some  of  the  increased  hazard  and  for  the  actual  increase  in 
the  loss  of  property  by  fire. 

The  normal  losses  by  fire  in  the  United  States  have  been  very 
large  as  compared  either  with  the  per  capita  loss  or  the  ratio 
to  total  property  value  in  other  nations,  without  having  these 
increased  hazards  added.  Complete  statistics  of  such  annual 
losses  are  not  tabulated,  since  there  are  no  records  of  the  smaller 
fire  losses  compiled.  The  following  statistics  show  the  annual 
losses  since  1910  with  the  limitations  previously  noted:  ^ 

*  National  Board  of  Underwriters,  1916. 


EFFECT   ON    FIRE   INSURANCE  229 

igio  $214,003,300 

1911  217,004,575 

1912  206,438,900 

1913  203,763,550 

1914  221,439,350 

1915  172,033,200 

1916  214,530,99s 

The  statistics  already  available  for  the  year  1917  show  that 
the  losses  of  1916  will  be  materially  exceeded. 

Foreign  Companies  in  the  United  States 

A  factor  to  be  taken  into  consideration  with  respect  to  the 
effect  of  the  war  on  fire  insurance  in  the  United  States  is  the 
large  representation  of  foreign  fire  insurance  companies.  There 
were  in  191 6  eighty-three  such  companies  reporting  to  the  Insur- 
ance Superintendent  of  the  state  of  New  York.^  These  com- 
panies collected  in  fire  and  marine  premiums,  in  19 16,  about 
$160,000,000,  as  compared  to  the  $290,000,000  premiums 
which  were  collected  by  the  American  companies.  Some  of 
these  foreign  companies,  especially  the  English  concerns,  have 
been  purchasing  companies  already  organized  and  operating  in 
the  states.  These  foreign  companies  of  Europe  operate  both 
as  direct  writing  and  as  reinsurance  organizations  in  competition 
with  the  American  companies.  They  have  especially  at  times 
of  conflagrations  in  the  United  States  very  materially  aided  in 
distributing  the  losses.  Whether  the  domestic  companies  are 
able  to  absorb  all  the  business  now  done  by  these  foreign  com- 
panies, and  whether  it  is  desirable,  as  in  the  case  of  conflagration 
losses,  to  limit  the  distribution  of  such  losses,  is  a  debatable 
point.  As  will  be  later  shown,  these  foreign  fire  insurance  com- 
panies of  enemy  nations  and  allies  of  the  enemy  have  been 
excluded  and  the  business  held  by  them  must  be  assumed  by  the 
domestic  companies  and  such  other  foreign  companies  as  have 
been  permitted  to  continue  in  business. 

*  The  Vital  Relation  of  Insurance  to  Banking  and  Shipping   (Pamphlet), 
Henry  Evans,  President  American  Eagle  Fire  Insurance  Company. 


230  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

Increase  in  Taxes 

The  fire  insurance  business  has,  Hke  many  other  forms  of 
business,  been  subjected  to  increased  taxes  as  a  result  of  the 
war.  This,  together  with  the  other  increased  costs  described 
in  the  eariier  part  of  this  discussion  of  fire  insurance,  has  very 
materially  increased  the  expenses  of  doing  business. 

Title  V  of  the  War  Revenue  Act  provides  as  follows : 

Sec.  504  (b)  Marine,  inland  and  fire  insurance :  A  tax  equivalent  to  one 
cent  on  each  dollar  or  fractional  part  thereof  of  the  premium  charged  under 
each  policy  of  insurance  or  other  instrument  by  whatever  name  the  same  is 
called,  whereby  insurance  is  made  or  renewed  upon  property  of  any  descrip- 
tion (including  rents  or  profits)  whether  against  peril  by  sea  or  inland 
waters,  or  by  fire  or  lightning,  or  other  peril :  Provided,  That  policies  of 
reinsurance  shall  be  exempt  from  the  tax  imposed  by  this  subdivision. 

Sec.  505.  That  every  person,  corporation,  partnership,  or  association,  issu- 
ing policies  of  insurance,  upon  the  issuance  of  which  a  tax  is  imposed  by 
Section  504,  shall  within  the  first  fifteen  days  of  each  month,  make  a  return 
under  oath,  in  duplicate,  and  pay  such  tax  to  the  collector  of  internal 
revenue  of  the  district  in  which  the  principal  office  or  place  of  business  of 
such  person,  corporation,  partnership,  or  association  is  located.  Such  returns 
shall  contain  such  information  and  be  made  in  such  manner  as  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury,  may  by  regulation  prescribe. 

Experience  has  shown  that  it  is  not  an  easy  matter  to  shift 
such  taxes  to  the  property  owner,  due  in  part  to  the  character 
of  the  tax  and  in  part  to  excessive  competition  in  the  business. 
Such  a  tax,  as  well  as  the  other  increased  expenses,  might 
theoretically  be  absorbed  in  the  higher  rates  charged  for  the 
insurance,  but,  as  has  been  previously  shown,  fire  rates  are  not 
to  any  large  degree  an  elastic  price.  Their  method  of  determina- 
tion, both  as  affected  by  public  regulation  and  by  competition 
among  the  companies,  makes  it  practically  impossible  for  such 
rates  to  be  increased  to  absorb  much  expenses. 

It  may  therefore  well  happen  that  their  increased  expenses 
of  doing  business  will  reduce  the  already  lower  profit  which 
American  fire  insurance  companies  enjoy,  as  compared  to  that 
of  many  of  the  companies  of  European  nations. 


EFFECT   ON    FIRE   INSURANCE  23I 

Status  of  Enemy  Companies 

One  of  the  most  important  questions  which  have  arisen  as 
a  result  of  the  war  in  its  bearing  on  fire  insurance  is  what  should 
be  done  with  enemy  insurance  companies.  It  has  already  been 
shown  that  large  amounts  of  fire  insurance  have  been  written 
by  foreign  companies,  either  as  direct  writing  or  as  reinsurance 
organization.  In  practically  all  cases,  especially  in  the  case  of 
direct  writing  companies,  the  laws  of  the  various  states  required 
such  companies  to  maintain  reserves  in  this  country,  and  with 
the  business  organization  thus  resulting,  these  companies  became 
in  a  large  sense  in  the  same  financial  relation  to  policyholders  as 
the  domestic  companies.  However,  considerable  sentiment  de- 
veloped in  the  country  against  the  companies  of  the  enemy.  The 
bases  of  this  opinion  and  sentiment  were:  first,  that  information 
regarding  the  resources  of  the  nation  and  its  preparation  for  war 
was  reaching  the  enemy  through  the  agents  of  these  enemy,  or 
allies  of  the  enemy,  insurance  companies;  second,  the  desire  of 
American  companies  to  secure  the  business  of  these  foreign  com- 
panies; third,  the  unfavorable  settlement  which  some  of  these 
foreign  companies  had  made  with  policyholders  at  the  time  of 
the  San  Francisco  fire,  when  the  claims  were  not  settled  on  as 
liberal  a  basis  as  was  adopted  by  many  American  and  other 
foreign  insurance  companies. 

The  President  had  in  April,  191 7,  issued  a  proclamation  which 
permitted  these  foreign  companies  to  continue  in  business  under 
certain  liberal  conditions,  but  later  events  seemed  to  make  it 
desirable  to  establish  closer  restrictions  on  enemy,  or  allies  of 
the  enemy,  insurance  companies. 

Therefore,  when  the  first  comprehensive  trading  with  the 
enemy  act  was  passed  by  Congress,  the  President  was  given 
large  powers  over  such  companies.  Under  the  provision  of  this 
act,  the  matter  was  referred  to  the  Secretary  of  the  Treasury, 
and  a  hearing  was  held  on  the  subject  of  whether  such  com- 
panies should  be  permitted  to  continue  in  business. 

The  arguments  for  and  against  such  a  permission,  as  well  as 


2;^2  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

the  chief  facts  in  reference  to  the  business  of  such  companies, 
are  presented  in  the  following  abstract  of  this  hearing/ 

There  are  but  four  German  insurance  companies  doing  direct  insurance  in 
this  country.  Although  they  are  of  German  origin,  their  business  in  this 
country  is  conducted  as  if  by  independent  American  concerns.  Each  of 
them  has  a  capital  in  this  country  under  the  supervision  of  the  insurance 
departments  of  the  several  states  and  of  American  trustees,  largely  in  excess 
of  the  requirements  of  the  insurance  laws.  They  have  been  transacting  busi- 
ness here  for  many  years,  one  of  them  for  as  many  as  forty-four  years. 

The  managers  of  these  concerns,  Aachen  and  Munich,  Hamburg-Bremen, 
and  Nord-Deutsche  and  Prussian  National,  are  American  citizens  by  birth 
and  hneage,  who  have  no  German  blood  in  their  veins. 

The  agencies  throughout  the  country  are  conducted  by  Americans.  The 
importance  of  these  German  companies  to  citizens  of  this  country  is  very 
great.  There  are  something  like  2,000,000  policyholders,  who  would  be 
deprived  of  the  protection  of  the  benefit  of  their  premiums.  The  President 
recognized  this  situation  in  his  proclamation  of  April  6,  1917,  in  which  he 
said  that: 

The  interests  of  the  citizens  of  the  United  States  in  the  protection  afforded 
by  such  insurance  are  of  great  magnitude,  so  that  it  is  deemed  to  be  impor- 
tant that  the  agencies  of  such  companies  in  the  United  States  be  permitted 
to  continue  in  business. 

And  he  thereupon  proclaimed  that  these  German  companies  should  be 
permitted  so  to  continue  "  as  though  a  state  of  war  did  not  now  exist."  The 
arguments  that  these  companies  are  in  a  position  to  obtain  secret  informa- 
tion which  can  be  used  against  the  United  States  and  are  the  recipients  of 
many  millions  of  dollars  of  premium  that  go  to  support  Germany  have  abso- 
lutely no  merit.  In  the  first  place,  these  companies  can  obtain  no  informa- 
tion that  is  not  open  to  hundreds  of  thousands  of  others  who  are  unre- 
stricted. 

To  suggest  that  they  have  any  interest  in  encouraging  destruction  is,  of 
course,  absurd,  as  they  are  insurers  against  destruction.  The  premiums 
earned  by  them,  as  provided  by  the  President's  proclamation  and  the  trad- 
ing with  the  enemy  act,  must  remain  in  this  country  during  the  war.  Not 
a  dollar  can  be  sent  abroad,  nor  can  these  companies  communicate  with  their 
home  offices  while  the  war  is  in  progress,  except  with  the  approval  of  the 
proper  authorities. 

The  argument  in  opposition  branded  the  enemy  fire  insurance  business  in 
the  United  States  as  "  unsafe,  unpatriotic,  unsound  and  unnecessary."  It 
was  pointed  out  that  if  enemy  companies  are  licensed  they  would  have 
access  to  the  work  of  the  engineers  and  inspectors  of  the  national  or  state 
boards  of  underwriters,  and  also  could  send  their  own  inspectors  through 
properties,  including  munition  plants,  flour  mills,  storage  warehouses  of  all 
kinds,  docks,  wire  factories  and  many  other  industrial  establishments. 

*  The  Journal  of  Commerce,  November  16,  1917. 


EFFECT   ON    FIRE   INSURANCE  233 

In  France  and  England  at  the  beginning  of  the  European  War  the  Ger- 
man insurance  companies  were  promptly  ousted  and  it  is  difficult  to  see  why 
they  have  been  suffered  to  continue  so  long  in  the  United  States.  Obviously, 
there  is  no  argument  permitting  enemy  or  ally  of  enemy  fire  insurance  com- 
panies to  do  business  in  this  country  which  would  not  apply  equally  to  banks, 
mercantile  companies,  manufacturers  or  steamship  companies  of  Germany  or 
her  allies. 

A  very  important  consideration,  in  view  of  the  worldwide  campaign  of 
German  propaganda,  is  the  sentimental  effect  of  tolerating  German  com- 
panies in  this  country,  which  Germans  can  use  and  doubtless  will  use 
throughout  the  world  as  an  argument  that  the  people  of  the  United  States 
are  not  opposed  to  the  Germans,  do  not  dislike  them  and  are  willing  to  do 
business  with  them,  as  is  shown  by  their  friendly  support  of  German  fire 
insurance  companies  in  the  United  States,  and  that  hence  it  may  fairly  be 
reasoned  that  America's  war  is  a  capitalists'  war,  instigated  by  the  rich  who 
desire  to  make  a  profit  from  munitions  contracts  and  financing. 

As  has  been  stated,  the  American  people  are  just  beginning  to  realize 
what  it  means  to  accept  insurance  policies  with  German  companies,  and  it 
is  only  a  question  of  time  when  this  business  will  be  eliminated  by  the 
action  of  the  mass  of  the  American  people.  It  is  highly  desirable,  however, 
that  the  United  States  Government  back  up  this  sentiment  and  expedite  the 
ousting  of  the  German  companies  by  refusing  them  licenses. 

Mr.  Hurd  put  into  the  record  of  the  hearing  the  following  table  of  the 
assets  and  risks  in  the  United  States  of  the  fire  insurance  companies  of 
enemy  countries,  reporting  to  the  New  York  State  Insurance  Department 
on  December  31,  1916: 

Name  of  Company  and  Home  Office, 

Direct  Writing  Companies  :  Assets  in  U.  S.      Risks  in  U.  S. 

Aachen  &  Munich  Fire  Insurance  Company, 
Aix-la-Chapelle    $2,850,000  $264,972,000 

Hamburg-Bremen  Fire  Insurance  Company, 
Hamburg    1,902,000  207,672,000 

Nord-Deutsche  Insurance  Company,  Ham- 
burg    1,201,000  129,280,000 

Prussian     National     Insurance     Company, 
Stettin 2,420,000  225,294,000 


Total     $8,373,000  $827,218,000 

Reinsurance  Companies : 

Balkan  National  Insurance  Company,  Sofia  $2,637,000  $261,424,000 
Bulgaria    First    National    Insurance    Com- 
pany, Rustchuk   2,159,000  233,628,000 

Cologne  Reinsurance  Company,  Cologne...  1,410,000  204,826,000 

Frankona  Reinsurance  Company,  Berlin...  1,280,000  138,791,000 

International  Reassurance  Company,  Vienna  1,272,000  110,943,000 

Munich  Reinsurance  Company,  Munich 9,126,000  964,668,000 

So.  German  Reinsurance  Company,  Munich  1,515,000  111,872,000 


Total     $19.399.000  $2,026,152.000 

Grand  Total  $27,772,000  $2,853,370,000 


234  EFFECTS    OF   THE   WAR   UPON   INSURANCE 

From  the  above  statement  it  appears  that  the  eleven  enemy  and  ally  of 
enemy  companies  in  the  United  States  have  assets  of  only  $27,772,000  as 
against  risks  of  $2,853,370,000  or  less  than  one  cent  for  each  dollar  of  risk. 
The  danger  to  American  citizens  holding  policies  in  these  German  companies 
is  that  in  case  of  a  conflagration,  which  is  an  ever  present  danger,  these 
German  companies  would  be  bankrupted  and  the  policies  would  not  be  paid. 
It  is  obvious  that  no  money  can  come  from  Germany  to  the  United  States 
to  support  these  German  companies,  and  judging  by  the  experiences  in  the 
San  Francisco  conflagration,  no  money  would  come  from  Germany  to 
enable  the  German  companies  to  pay  their  legitimate  American  losses  even 
if  Germany  were  able  to  send  the  money. 

It  may  be  argued  that  in  case  of  a  great  conflagration  many  American 
companies  would  be  bankrupt,  but  history  has  shown  that  American  com- 
panies, first,  have  a  sense  of  honor  and  value  their  business  reputation,  and, 
second,  have  a  valuable  annual  premium  income,  and  hence  they  could  and 
would  assess  their  stockholders  for  any  money  necessary  to  make  good  their 
losses.  ^ 

The  German  fire  insurance  companies,  which  have  been  compelled  by  the 
German  Government  to  sell  their  good  securities  and  to  take  the  bonds  of 
the  German  Government  in  place  thereof,  must  face  a  severe  scaling  or  pos- 
sibly an  entire  repudiation  of  these  German  Government  bonds. 

Possibly  the  only  argument  which  enemy  or  ally  of  enemy  insurance  com- 
panies can  advance  is  that  the  protection  of  their  underwriting  capital  is 
necessary  to  the  United  States.  It  is  easy  to  prove  that  there  is  nothing  in 
this  argument  since,  as  has  been  stated,  not  a  single  American  fire  insurance 
company  has  any  reinsurance  contracts  with  the  German  companies.  In 
other  words,  the  enemy  reinsurance  business  is  practically  wiped  out. 

As  to  the  four  direct  writing  German  companies,  their  premiums  have 
amounted  to  about  one  per  cent  of  the  total  premium  income  in  the  United 
States  and  this  is  diminishing  constantly  and  is  now  probably  not  over  one- 
half  of  one  per  cent.  The  small  balance  of  their  business  can  be  easily  and 
gladly  absorbed  by  the  American  companies  in  conjunction,  if  need  be,  with 
the  Enghsh  and  French  companies.  The  highest  authorities  in  the  insurance 
world  bear  testimony  both  by  letters  and  by  those  present  that  there  will 
not  be  the  slightest  difficulty  on  the  part  of  the  American  companies  in 
absorbing  all  the  insurance  shifted  from  the  German  companies. 


Exclusion  of  Enemy  Companies 

The  result  of  this  hearing  was  a  refusal  on  the  part  of  the 
Secretary  of  the  Treasury  to  license  such  companies. 

The  terms  of  the  Secretary's  decision  are  as  follows : 

By  virtue  of  the  authority  vested  in  me  by  the  President  under  the  trad- 
ing with  the  enemy  act  to  grant  or  withhold  licenses  to  enemy  or  ally  of 
enemy   insurance   companies,   a  hearing  was   called   of   the  various  parties 


EFFECT   ON    FIRE   INSURANCE  235 

interested,  including  the  state  superintendents  of  insurance.  The  hearing 
was  largely  attended,  and,  after  full  discussion,  briefs  were  filed. 

Upon  careful  weighing  of  the  evidence  submitted,  I  have  reached  the  con- 
clusion that  the  safety  of  the  United  States  requires  that  enemy  and  ally  of 
enemy  marine,  fire  and  casualty  insurance  companies  shall  not  be  allowed 
to  do  business  as  going  concerns.  The  consideration  of  safety  is  so  impor- 
tant as  to  render  it  unnecessary  to  determine  at  this  time  whether  this 
action  is  also  demanded  by  other  considerations  incident  to  the  successful 
prosecution  of  the  war. 

In  these  circumstances  I  am  convinced  that  the  best  interests  of  the  coun- 
try will  be  served  by  the  liquidation  of  these  companies  under  certain  direc- 
tion of  their  American  management  and  subject  to  such  regulations  as  the 
Secretary  of  the  Treasury  may  from  time  to  time  prescribe. 

As  the  liquidation  of  the  life  insurance  companies  involved  may  work  an 
injustice  to  policyholders  and  as  the  information  accessible  to  such  com- 
panies can  not  benefit  the  enemy  because  of  the  character  of  the  business  and 
its  inconsiderable  proportions,  these  companies  for  the  present  will  be 
allowed  to  continue  existing  contracts.' 

The  license  under  which  the  managers  are  allowed  to  liquidate 
the  affairs  of  these  companies  provides  for  the  control  and 
supervision  of  all  financial  transactions  by  the  Alien  Property 
Custodian.  State  superintendents  of  insurance  will  be  furnished 
with  copies  of  the  licenses  issued  to  all  such  companies  authorized 
to  do  business  in  their  states. 

The  following  table  shows  the  total  assets,  unearned  premium 
reserve,  total  liabilities  and  net  surplus  of  all  the  German  and 
German-ally  companies  on  December  31  last,  as  reported  to  the 
New  York  Insurance  Department,  together  with  the  premiums 
written  by  each  company  during  1916: 

*  Journal  of  Commerce,  November  27,  1917. 


2l(> 


EFFECTS    OF   THE   WAR   UPON    INSURANCE 


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EFFECT   ON    FIRE   INSURANCE  237 

Under  this  ruling  of  the  Secretary  of  the  Treasury,  it  was 
necessary  for  these  companies  to  close  up  their  business,  and  in 
order  to  do  so  the  following  license  and  directions  were  issued 
by  the  government : 

I  hereby  grant  a  license  to  the ,  whereof ,  of , 

are  United  States  managers,  to  continue  to  do  fire,  tornado  and 
hail  insurance  business  under  the  following  conditions : 

(i)  To  reinsure  its  outstanding  risks,  except  with  unlicensed 
enemy  or  ally  of  enemy  individuals,  partnerships,  or  corporations. 

(2)  To  cancel  its  policies  in  accordance  with  the  terms  and 
conditions  of  the  same,  and  with  the  consent  of  the  other  con- 
tracting party,  or,  as  provided  by  the  terms  thereof,  to  cancel 
treaties  or  other  contracts  relating  to  risks  or  policies. 

(3)  To  accept  cancelation  of  policies,  treaties  or  other  con- 
tracts. 

(4)  To  receive  payment  of  agents'  balances,  premiums,  re- 
insurance premiums,  return  premiums,  reinsurance  claims,  sal- 
vages and  other  accounts  due. 

(5)  To  pay  out  any  money  authorized  by  the  Alien  Property 
Custodian,  or  as  hereinafter  provided. 

(6)  To  receive  money,  security,  or  other  property  due  in 
respect  of  insurance  or  reinsurance  business  or  other  obligations 
entered  into  prior  to  the  date  of  this  license. 

(7)  To  pay  the  necessary  and  reasonable  expenses  incurred 
in  conducting  business  under  and  in  accordance  with  this  license. 

The  foregoing  provisions  are  subject  to  and  limited  by  the 
following  conditions : 

1.  That  no  new  insurance  or  reinsurance  shall  be  written  or 
accepted  after  12  days  from  the  date  of  issuance  of  this  license. 

2.  That  no  new  reinsurance  or  retrocession  shall  be  effected 
or  accepted  under  new  or  existing  contracts  or  treaties,  except 
in  respect  to  contracts  existing  at  the  date  hereof,  as  per  list 
attached,  and  continued  by  permission  of  this  Department  for 
not  exceeding  45  days  from  date  of  this  license. 

3.  That  all  disbursements  shall  be  made  by  check  or  draft, 
or  by  letter  of  instructions  authorizing  a  depositary  to  make 


238  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

disbursement  for  account  of  the  company,  and  all  checks,  drafts 
and  letters  of  instruction  must  be  countersigned  or  approved  by 
the  Alien  Property  Custodian,  or  by  some  person  duly  authorized 
thereto  by  him;  except  that  the  licensee  may,  without  counter- 
signature, pay  not  exceeding  twenty-five  hundred  dollars  to  any 
one  claimant  in  settlement  of  a  loss  claim  under  a  policy  of 
liability,  casualty  or  workman's  compensation  insurance,  but  no 
payment  shall  be  made  to  any  unlicensed  enemy  or  ally  of  enemy 
as  defined  in  the  trading  with  the  enemy  act. 

4.  That  statements  of  all  income  or  outgo  and  of  all  assets, 
liabilities  or  other  affairs  of  the  company  shall  be  rendered  when 
and  as  required  by  the  Alien  Property  Custodian,  and  shall  be 
mailed  to  the  Alien  Property  Custodian  or  delivered  to  such 
person  as  shall  be  duly  authorized  by  him  to  receive  such 
statement. 

5.  That  all  costs  or  expenses  incurred  by  the  Alien  Property 
Custodian  or  his  duly  authorized  representative  in  carrying  out 
the  foregoing  provisions  shall  be  borne  by  the  company. 

6.  That  no  communication  of  any  kind  be  sent  out  of  the 
United  States  by  the  licensee  in  any  manner  except  with  the 
permission  of  the  Treasury  Department. 

7.  That  nothing  herein  contained  shall  be  deemed  to  authorize- 
any  transaction  by  the  company,  its  managers  or  trustees  con- 
trary to  the  laws  of  any  state,  territory  or  the  District  of 
Columbia. 

8.  This  license  is  subject  to  revocation  on  notice. 

Fire  Insurance  in  France 

In  France  the  fire  insurance  companies  have  had  a  difficult 
history,  since  a  considerable  part  of  the  country  either  has  been 
occupied  by  the  enemy,  or  has  been  occupied  by  the  French, 
British  and  other  Allied  armies  in  their  efforts  to  force  the  enemy 
out  of  the  country.  From  the  beginning  of  the  struggle,  the 
disturbance  occasioned  by  the  war  has  affected  the  whole  nation 
and  the  business  of  fire  insurance  has  suffered  from  this  chaotic 


EFFECT   ON    FIRE   INSURANCE  239 

condition.  The  pressure  on  industry  has  been  very  great:  the 
derangement  of  the  usual  Hfe  and  activities  of  the  people  has 
been  profound;  the  strain  of  war  has  brought  about,  as  in  all 
nations,  a  certain  indifference  to  the  ordinary  safeguards  of 
property  exposed  to  fire. 

The  peculiar  conditions  arising  out  of  the  war  have  made  necessary  an 
understanding  between  the  property  interests  and  the  fire  insurance  com- 
panies in  France.  An  arrangement  was  therefore  made,  says  the  French 
agricultural  paper,  La  Vie  Agricole,  between  the  President  of  the  Committee 
of  General  Fire  Insurance  Interests  and  the  President  of  the  Association  of 
French  Industry  and  Agriculture. 

It  was  agreed  that  the  position  of  mobilized  persons  and  insured  persons, 
particularly  those  in  the  invaded  regions,  should  be  determined  as  follows : 

Nonpayment  of  Premiums.  The  nonpayment  of  premiums  shall  in  no 
case  entail  forfeiture  of  the  rights  of  the  assured  during  the  entire  period 
of  hostilities. 

Risks  Destroyed,  Disappeared  or  Reduced  by  Act  of  War. 

The  following  four  cases  contemplate  only  the  assured  in  the  invaded 
regions : 

First  Case.  The  premium  is  entirely  refunded  when  it  has  been  paid  after 
the  destruction  or  complete  disappearance  of  the  risks  prior  to  its  falling 
due. 

Second  Case.  When  the  destruction  or  complete  disappearance  is  subse- 
quent to  the  payment  of  the  premium,  the  company  shall  refund  as  many 
times  one-twelfth  of  the  premium  as  there  were  entire  months  remaining 
to  run,  at  the  time  of  destruction  or  disappearance,  until  the  expiry  of  the 
period  for  which  the  premium  had  been  paid. 

Third  Case.  When  the  destruction  or  complete  disappearance  takes  place 
after  the  due  date  but  before  the  payment  of  the  premium,  the  company  shall 
only  require  the  payment  of  as  many  times  one-twelfth  of  the  premium  as 
correspond  to  the  number  of  months  elapsed  between  the  maturity  of  the 
premium  and  the  destruction  or  disappearance  of  the  risk,  any  fraction  of  a 
month  being  reckoned  as  a  complete  month. 

Fourth  Case.  In  the  event  of  partial  destruction  or  disappearance,  what- 
ever the  value  of  the  part  destroyed  or  disappeared,  the  cancelation  or  split- 
ting up  into  fractions  of  the  premium  is  calculated  on  the  foregoing  basis, 
in  proportion  to  the  reduction  of  the  capital  insured.  This  reduction  is 
recorded  by  a  memorandum  stipulating  that  it  is  not  a  definitive  reduction 
but  a  partial  suspension.  On  the  date  of  partial  or  complete  restoration  of 
the  risk  the  assured  is,  on  the  other  hand,  bound  to  declare  the  extent  of 
the  restoration  of  the  risk  immediately  to  the  company  and  to  require  from 
the  latter  the  completion  of  his  insurance. 

For  additional  insurance  against  the  risk  of  suspension  of  business  the 
companies  follow  the  same  rules  as  in  the  insurance  of  material  risks. 

The  cases  specified  above,  whether  destruction  or  complete  or  partial  dis- 


240  EFFECTS   OF   THE   WAR   UPON   INSURANCE 

appearance  is  in  question,  never  give  rise  to  cancelation  of  the  insurance 
but  only  to  its  total  or  partial  suspension. 

Idleness  or  Suspension  of  Operations  Owing  to  War.  When  a  risk  is 
insured  against  stoppage  of  work,  the  special  premium  in  respect  thereof 
will  be  changed  according  to  the  rules  laid  down  above  for  assessing  the 
fire  risk  premium.' 

Notwithstanding  this  generally  disturbed  condition,  the 
French  fire  insurance  companies  have  been  able  to  secure  on  the 
whole  fairly  satisfactory  results,  as  reported  in  U Argus,  and 
translated  by  The  Economic  World  as  follows :  ^ 

Although  not  as  favorable  as  those  of  191 5,  the  results  achieved  by  the 
French  fixed  premium  fire  insurance  companies  during  the  year  1916  proved 
to  be  reasonably  satisfactory,  though  allowance  must  always  be  made  for 
the  unknown  quantity  of  the  losses  incurred  in  the  invaded  districts.  Still, 
of  the  various  branches  of  insurance  it  is  fire  insurance  which  appears  to 
be  getting  off  the  best  in  the  course  of  the  severe  ordeals  that  we  are  hav- 
ing to  endure. 

It  has  more  than  once  been  said — and  with  a  certain  amount  of  truth — 
that  the  firebugs  were  for  the  most  part  mobilized  with  our  armies.  Let  us 
hope  that  those  of  them  who  return  from  the  front  will  bring  back  from 
their  sojourn  there  less  subversive  ideas  than  they  entertained  before  the 
war.  Even  in  their  absence,  while  the  sum-total  of  the  insurance  written 
increased  nearly  five  and  a  half  billion  francs  from  1915  to  1916,  the  losses 
increased  almost  eight  million  francs. 

The  following  table,  which  gives  the  increase  or  decrease  in  the  amount 
of  insurances  written  for  each  of  the  past  seven  years,  brings  out  very 
clearly  the  effects  of  the  war  upon  the  volume  of  business  done  by  the 
French  fire  insurance  companies : 

Increase  (-f)  or  Decrease  ( — )  in  the  Amount  of  Insurances  Written 
OVER  THE  Preceding  Year 

Year  Francs  Year  Francs 

1910 +5,398,144,353  1914 —1,110,928,122 

1911 +6,887,774,271  1915 —7,128,459,871 

1912 +5,009,264,659  1916 +5,470,359,397 

1913 +8,665,972,089 

If  we  turn  to  the  taxes  which  thrift,  in  the  form  of  insurance,  has  had  to 
bear  we  find  a  new  increase  for  the  year  1916.  The  principal  companies 
have  paid  over  to  the  state  in  1916  not  less  than  28,816,929  francs.  For  the 
latter  they  alv/ays  constitute  the  ideal  collector,  since  they  collect  for  it 
gratuitously  these  numerous  millions.  Furthermore,  not  only  is  this  service 
of  collection  gratuitous,  but  the  insurance  companies  have  paid  these  taxes 
without  taking  into  account  the  noncollectible  premiums  in  the  invaded  ter- 
ritory and  those  still  owed  by  reason  of  the  moratorium. 

'  The  Economic  World,  n.  s.,  vol.  xii.  No.  4,  p.  19. 

'  L' Argus,  translated  by  The  Economic  World,  n.  s.,  vol.  xiv,  No.  22,  p.  780. 


EFFECT   ON    FIRE   INSURANCE  24I 

In  the  following  table  are  given  the  amount  of  taxes  paid  by  the  com- 
panies to  the  state,  and  the  increase  or  decrease  in  the  taxes  so  paid  from 
the  previous  year  for  each  year  since  1910: 

Increase  (+) 

Taxes  paid  or  Decrease  ( — ) 

Year                                            (Francs)  (Francs) 

1910    26,555,287  +   799,794 

1911    27,236,319  -I-   681,032 

1912    28,277,515  -1-1,041,196 

1913    28,894,848  +   617,333 

1914    28,342,279  —   552,119 

1915    28,044,55s  —  298,174 

1916    28,816,929  -I-  T]2,y]A, 

If  we  analyze  the  results  obtained  by  the  individual  companies  we  find 
that  despite  the  state  of  war  and  the  fact  that  the  losses  incurred  were 
greater  than  in  1915,  all  the  companies,  with  one  exception,  have  had  an 
increased  production  during  1916.  The  following  table  gives  the  amount  of 
insurances  written  and  the  losses  paid  for  each  of  the  principal  companies 
during  the  past  year,  with  comparative  figures  for  1915 : 

Amount  of  Insurances  Written  Losses  Paid 

1915  1916  .    1915  1916 

Company  (Francs)                (Francs)  (Francs)  (Francs) 

Generale    23,051,345,110  23.855,900,866         8,973,800  10,235,173 

Phenix   20,947,632,141  21,853,644,977          7,254,420  7,099,681 

Nationale    20,666,425,470  20,824,074,783          8,013,235  8,380,666 

Union     28,517,867,432  29,122,337,109  17,019,905  16,610,359 

Soleil    17,811,841,186  17,882,830,713  10,758,337  10,340,242 

France   14,722,736,418  15,143,039,810         5,284,508  6,878,492 

Urbaine     15,469,860,744  16,983,851,857  10,283,424  13,201,324 

Providence   6,992,970,667  7,033,054,323          2,532,947  3,144,786 

Aigle    9,338,944,973  9.366,550,079         5,422,503  5,542,708 

Paternelle   16,344,408,973  16,645,381,407         2,754,458  3,273,340 

Confiance    8,268,460,312  9,594,808,630          1,839,939  2,065,501 

Abeille   9,948,000,000  10,059,565,194         3,784,231  4,693,424 

Monde    6,906,277,748  7,101,309,210         2,993,131  2,924,116 

Fonciere    10,161,442,095  9,025,387,236          1,738,910  1,669,052 

Metropole     6,780,809,160  6,907,645,632         2,654.385  3,164,710 

Total    215,929,022,429      221,399,381,826        91,128,133        99,223,574 

Summing  up  the  operations  of  the  companies  for  the  past  seven  years  we 

find  that  the  amount  of  insurances  written,  the  losses  paid  and  the  taxes  paid 

to  the  state  have  been  as  follows : 


Year 

1910 

191 1 

1912 

1913 

1914 

1915 

1916 


Insurances  Written 
(Francs) 

203,605,399,403 
210,493.173.674 
215,502,438,333 
224,168,410,422 
223,057,482,300 
215,929,022,429 
221,399,381,826 


Losses  Paid 
(Francs) 

95,709,695 
134,198,916 
111,003,901 

109.790,147 

105,207,199 

91,128,133 

99,223,574 


Taxes  Paid 
(Francs) 
26,555,287 
27,236.319 
28.277,515 
28,894,848 
28.342,729 

28,044.555 
28,816,929 


242  EFFECTS    OF   THE    WAR   UPON    INSURANCE 


Fire  Insurance  in  Germany  and  Austria 

It  has  been  extremely  difficult  to  secure  information  as  to  any- 
kind  of  insurance  from  the  Central  Powers,  Germany  and  Aus- 
tria on  account  of  the  blockade.  So  far  as  such  information  is 
available,  the  problems  of  fire  insurance  companies  seem  to  be 
largely  the  same  as  those  of  the  fire  insurance  companies  in  the 
other  nations  at  war.  There  has  been  a  marked  depreciation  in 
security  values,  a  tendency  for  losses  to  increase,  although,  as 
in  other  nations,  the  higher  level  of  prices  and  the  consequent 
increase  in  value  of  many  forms  of  property  have  served  in  part 
to  counteract  some  of  these  negative  influences. 

Reports  for  191 5  seem  to  indicate  a  more  favorable  result 
than  those  for  19 14,  as  indicated  in  the  following  statistics.^ 
Premiums  have  fallen,  but  losses  have  decreased. 


Surplus 

Interest 

Depre- 

over 

and 

ciation 

Net 

Net 

Premium 

Losses  and 

Other 

Written 

Premiums 

Losses 

Reserve 

Expenses 

Receipts 

off 

M. 

M. 

M. 

M. 

M. 

M. 

I9I4.-- 

.     162,403,333 

90,125,077 

128,482,322 

9,026,608 

15,996,081 

1,620,392 

I9I5..- 

•     155,293,593 

71,922,234 

136,051,573 

19,741,779 

16,568,200 

6,843,462 

The  figures  of  the  less  important  branches  are  as  follovv^s : 

Hail: 

1914  45,455,339  33,706,271  3,018,659  5,311,891  1,967,468  495,6i6 

1915  39,046,137  25,355,811  3,566,193  7,045,713  2,248,900  588,751 

Live  Stock : 

1914  17,801,572  14,655,594  1,745,411  256,750  394,401   31,288 

1915  16,371,495  13,079,550  1,707,533  712,625  408,448   58,287 

Glass : 

1914  9,142,685  5,395,695  8,112,642  654,470  468,063   18,896 

1915  8,733,165  5,210,810  8,048,114  636,200  469,782   14,327 

Burglary : 

1914    11,583,720  2,613,937  11,210,740  3,915,417       309,746    

1915    10,948,529  2,388,933  11,259,491  4,509,801  315,692      11,477 

Water  Pipes : 

1914    2,833,697  897,008  2,105,273  666,992         75,568    

1915    2,726,030  922,596  2,075,458  804,794  79,719        5,500 

^  Post  Magazine  and  Insurance  Monitor  (London),  July  7,  1917. 


EFFECT   ON   FIRE   INSURANCE  243 

As  a  matter  of  interest  the  grand  totals  of  the  last  three  years  are  appended : 

Surplus  Interest        Depre- 

over  and          ciation 

Net               Net         Premium      Losses  and  Other         Written 

Premiums       Losses         Reserve        Expenses  Receipts           off 

M.                 M.                 M.                  M.  M.                M. 

1913..    1,520,254,868  844,972,909  5,722,857,258  182,808,814  118,273,368  12,945,675 

1914..     1,480,345,941  942,955,961  5,997,400,891  131,792,987  124,667,396    6,745,67s 

1915. .     1,403,013,805  927,539,983  6,252,663,723  159,170,426  127,688,299  19,097,445 

From  this  it  will  be  seen  that  during  the  last  three  years  over  M.  38,000,000 
has  been  written  off  on  account  of  depreciation. 

In  1915  the  paid-up  capital  of  the  German  joint-stock  companies  amounted 
to  M.  186,115,365,  the  uncalled  liability  being  M.  512,382,883.  The  principal 
forms  of  investment  were : 

House  property  174,782,336 

Stocks  and  shares  , 1,059,988,482 

Mortgages    5,777,075,796 

Bank  deposits    105,484,577 

Reinsurance  has  been  a  very  important  part  of  the  German 
jfire  insurance  organizations  and  this  business,  as  well  as  the 
directly  written  business,  they  have  lost  in  the  United  States, 
France,  England  and  Russia,  and  some  other  nations.  It  would 
appear,  however,  from  such  reports  as  are  available,  that  the 
managers  of  these  German  insurance  companies  have  set  about, 
with  the  zeal  and  enterprise  which  has  characterized  German 
business  activity  in  so  many  lines,  to  recoup  these  losses  and 
extend  their  business  when  peace  is  declared. 

A  writer  in  the  Munchner  Neueste  Nachrichten  states  that  in  no  other 
branch  of  economic  activity  in  Germany  are  the  preparations  for  peace  so 
marked  as  in  insurance.  The  measures  that  have  been  adopted  bear  the 
stamp  of  confidence  in  a  sound  future  development.  German  insurance  has 
been  able  to  maintain  itself  during  the  three  years  of  war  without  the  aid 
of  moratoria  or  similar  protection,  and  is  at  present  actively  engaged  in  forti- 
fying itself  for  the  struggle  after  the  war — for  the  covering  of  all  German 
requirements  for  insurance  without  recourse  to  the  international  market,  or, 
at  any  rate,  to  enemy  countries. 

In  transport  insurance  the  insurers  have  long  ago  deduced  for  the  economic 
measures  adopted  in  enemy  countries  the  necessity  of  so  strengthening  their 
position  as  to  be  able  to  take  the  largest  risks  independently  of  the  interna- 
tional market.  Hence  the  new  foundations,  especially  in  the  seaport  towns 
(Hamburg,  Bremen,  Liibeck,  Stettin)  ;  and  the  amalgamations,  partly  in  the 
form  of  complete  coalescence,  and  partly  in  the  looser  form  of  community  of 
interests.     In  either  case  the  motive  is  extension  of  business  and  reduction 


244  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

of  outlay,  as  well  as  the  desire  to  secure  the  support  of  a  larger  concern. 

The  same  tendency  to  expansion  also  manifests  itself  in  the  insurance  of 
goods.  Furthermore,  a  large  number  of  fire  insurance  companies,  having 
increased  their  guarantee  funds,  are  devoting  themselves  to  transport  insur- 
ance, while  many  transport  insurance  companies  are  adding  fire  insurance 
to  their  activities.  By  the  not  inconsiderable  increase  in  the  number  of 
insurers  in  both  these  branches,  the  possibilities  of  German  insurance  busi- 
ness are  enormously  extended,  and  German  insurance  is  thereby  made  inde- 
pendent of  the  international,  and  especially  of  the  English  market. 

The  movement  for  the  expansion  of  German  insurance  has  led  shipping 
and  trading  circles  to  think  of  uniting  individual  insurers  into  an  organiza- 
tion similar  to  Lloyd's  in  London. 

Whether  this  scheme  will  be  realized  remains  to  be  seen.  More  welcome, 
because  more  in  accord  with  actual  requirements,  is  the  new  venture  started 
on  June  i,  1917,  for  providing  shipping  intelligence,  which  is  another  prac- 
tical expression  of  Germany's  desire  to  free  herself  from  London. 

In  fire  insurance  similar  tendencies  toward  fusion  and  amalgamation,  as 
well  as  the  augmentation  of  guarantee  funds,  are  observable.* 

In  neutral  countries,  contiguous  to  the  area  of  the  war,  fire 
insurance  has  also  been  affected,  but  in  many  cases  not  as  seri- 
ously as  in  the  countries  engaged  in  the  war. 


Fire  Insurance  in  Sweden 

The  situation  of  fire  insurance  in  the  neutral  country  of 
Sweden  may  be  described  as  typical  of  that  in  most  neutral 
nations  in  Europe. 

Owing  to  the  war,  not  only  did  the  1914  figures  of  Swedish  fire  insurance 
business  come  to  hand  later  than  usual,  but  their  tabulation  on  this  side  also 
had  to  be  delayed.  The  earlier  arrival  of  the  1915  statistics  enables  us  to 
present  to  our  readers  the  joint  results  of  1914  and  1915.  It  is  satisfactory 
to  note  that  after  the  poor  profits  of  1912  and  1913  the  period  now  under 
consideration  makes  a  considerably  better  showing,  and  what  is  equally 
pleasing  is  the  fact  that  in  such  strenuous  times  as  the  present  the  British 
companies  may  fairly  claim  to  have  succeeded  in  retaining  the  confidence 
of  their  Swedish  insured.  Another  point  of  interest  is  that  the  loss  ratio 
of  the  foreign  companies  is  less  than  that  of  the  native  concerns. 

The  gross  figures  are  set  forth  below.  As  regards  the  mutual  companies 
we  have  only  deemed  it  necessary  to  give  the  total  results,  since  they  prac- 
tically confine  their  operations  to  Sweden  and  the  individual  figures  will  be 
found  in  the  Post  Magazine  Almanack.' 

'  Quoted  in  Journal  of  Commerce,  November  26,  1917. 

"Post  Magazine  and  Insurance  Monitor  (London),  July  7,  1917. 


EFFECT   ON    FIRE   INSURANCE 


^45 


Fire  Insurance  Premiums  and  Losses  in  Sweden 


1914 

Swedish     Companies     (Home  Premiums  Losses 

Fire    Business)  :  Kr.  Kr. 

Fenix   1,206,152  645,069 

Norrland     1,133,225  687,830 

Ocean     

Skandia 3,328,372  1,954,048 

Skandinavien 

Skane     1,664,367  981,808 

Svea     3,068,454  1,442,121 

Victoria     957.5t2  431,692 

Totals    11,358,082  6,142,568 

Swedish  Mutual  Companies  . .  5,115,971  2.975,393 

Total  for  Swedish  Companies  16,474,053  9,117,961 
Foreign  Companies — British : 

Alliance   19,589  5,679 

Commercial  Union   231,887  186,711 

Liverpool  &  London  &  Globe  106,890  47,490 

North  British  &  Mercantile  321,872  53,198 

Northern 43,394  3,6o6 

Norwich   Union    42,637  2,126 

Palatine     107,019  8,636 

Phoenix    157,209  41,249 

Royal    14,453  8,211 

Sun     166,106  13,675 

West  of  Scotland   39,007  3,469 

Yorkshire 281,188  111,052 

Total  for  British  Companies  1,531,251  485,102 

French : 

Assurances  Generales    87,700  14,570 

L'Union     186,073  88,458 

Swiss : 

Baloise    264,383  204,485 

Dutch : 

Netherlands    17,699  4,141 

Finnish : 

Fennia   59,999  4,i94 

Danish : 

Kongl-Ochoi    88,563  4,550 

Nordisk     129,197  193,882 

Nye  Danske  105,511  51,932 

German : 

Bayer-Bank  and  Berlinische  73,248  75,373 

Magdeburger  413,920  50,055 

Nord-Deutsche    40.140  7,756 

Preuss.   National    146,878  76.390 

Vaterland  and  Rhenania   . .  95,970  55,875 
Total    for    other    Foreign 

Companies    1,709,281  831,661 

Recapitulation : 

Swedish  companies   16,474,053  9,117,961 

British  companies   1,531,251  485,102 

Other  companies    1,709,281  831,661 

Totals    19,714,585  10,434,724 


191S 

Premiums 

Losses 

Kr. 

Kr. 

1,263.750 

469.744 

1,228,889 

936,867 

339,748 

146,035 

3,547,951 

2,364,091 

87,251 

2,242 

1,702,814 

1,011,179 

3,256,559 

1,861,073 

1,008,018 

621,260 

12,434,980 

7,412491 

4,794,702 

2,212,282 

17,229,682 

9,624,773 

26,595 

19,456 

227,200 

82,987 

86,751 

27,631 

325,041 

205,275 

A7;in 

18,319 

41,686 

13,702 

96,946 

48,837 

165,980 

32,066 

9,855 

1,605 

157,943 

61,937 

39,141 

42,562 

257,147 

245,603 

1481,658 

799.980 

92,656 

23,699 

194,500 

71,024 

253,437 

138,150 

215 

47,893 

47404 

98,446 

16,291 

121,089 

31,002 

122,508 

54,841 

77,452 

7,471 

407,851 

70,683 

40,934 

21,383 

126,849 

32,111 

90,67s 

50425 

1,674,290 

564,699 

17,229,682 

9,624,773 

1,481,658 

799,980 

1,674.290 

564.699 

20,385,630    10,989,452 


246  effects  of  the  war  upon  insurance 

Summary 

If,  then,  a  summary  of  the  effect  of  the  war  on  fire  insurance 
is  attempted,  the  following  statements  may  be  made : 

First,  it  is  somewhat  surprising  that  the  fire  insurance  com- 
panies have  been  able  to  make  so  good  a  showing  with  respect 
to  financial  results.  In  a  number  of  cases,  the  returns  to  share- 
holders since  the  war  are  in  excess  of  those  enjoyed  in  many 
years  previous  to  the  war.  Warning,  however,  must  again  be 
given  against  making  too  sweeping  deductions  as  to  final  results 
of  the  effect  of  the  war  on  fire  insurance.  In  many  cases  com- 
plete statistics  are  not  available  and  in  many  cases  causes  which 
will  produce  negative  results  either  have  not  had  time  to  bring 
about  these  final  effects,  or  have  not  yet  begun  to  operate. 

Second,  there  has  been  a  marked  increase  in  the  hazards  or 
risks  in  fire  insurance  in  practically  all  the  leading  nations.  In 
some  cases  this  has  been  counteracted  by  the  increase  in  the 
rates.  Owing  to  the  high  level  of  prices  and  the  consequent 
increase  in  property  values,  the  fire  insurance  companies  have 
been  able  to  increase  their  premium  receipt  without  a  propor- 
tional increase  in  the  number  of  risks  written.  This  has  had 
a  twofold  favorable  result.  In  the  first  place,  it  has  meant  an 
increased  premium  receipt  on  the  same  volume  of  business 
without  any  marked  increase  in  certain  material  expenses  con- 
nected with  writing  the  risk.  In  the  second  place,  unless  a 
marked  increase  in  the  losses  occurred,  this  has  meant  a  larger 
amount  out  of  which  to  pay  losses,  or,  in  other  words,  a  reduction 
in  the  real  amount  at  risk  by  the  insurance  company. 

Third,  there  has  been  an  increase  in  the  amount  of  taxes  which 
the  companies  have  had  to  pay,  as  well  as  an  increase  in  wages 
and  prices  for  supplies.  At  the  same  time,  there  has  been  a 
depreciation  in  many  of  the  investments  held  by  fire  insurance 
companies. 

All  in  all,  it  can  scarcely  be  argued  that  the  war  has  brought 
to  the  business  of  fire  insurance,  any  more  than  to  most  busi- 
nesses,  conditions  which  are   favorable.     The  war  has  intro-. 


EFFECT   ON    FIRE   INSURANCE  247 

duced  into  the  fire  insurance  business  many  disturbing  factors, 
and  it  is  in  times  of  peace  a  business  which  has  to  contend  with 
so  many  fluctuating  conditions,  that  anything  approaching 
scientific  bases  for  determining  prices  or  rates  is  extremely  dif- 
ficult to  secure. 


APPENDIX  A 
War  Risk  Insurance 

Treasury  Department,  September  8,  1914. 
The  appended  act  of  Congress,  approved  September  2,  1914,  establishing  a 
Bureau  of  War  Risk  Insurance  in  the  Treasury  Department,  is  published  for 
the  information  and  guidance  of  all  concerned. 

W.  G.  McAdoo, 
Secretary  of  the  Treasury. 

[Public  No.  193,  63d  Congress — S.  6357.] 

AN  ACT  To  authorize  the  establishment  of  a  Bureau  of  War  Risk  Insur- 
ance in  the  Treasury  Department. 

Whereas  the  foreign  commerce  of  the  United  States  is  now  greatly  impeded 
and  endangered  through  the  absence  of  adequate  facilities  for  the  insur- 
ance of  American  vessels  and  their  cargoes  against  the  risks  of  war ;  and 
Whereas  it  is  deemed  necessary  and  expedient  that  the  United  States  shall 
temporarily  provide  for  the  export  shipping  trade  of  the  United  States 
adequate  facilities  for  the  insurance  of  its  commerce  against  the  risks  of 
war:  Therefore 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United 
States  of  America  in  Congress  assembled,  That  there  is  established  in  the 
Treasury  Department  a  bureau  to  be  known  as  the  Bureau  of  War  Risk 
Insurance,  the  director  of  which  shall  be  entitled  to  a  salary  at  the  rate  of 
$5000  per  annum. 

Sec.  2.  That  the  said  Bureau  of  War  Risk  Insurance,  subject  to  the  gen- 
eral direction  of  the  Secretary  of  the  Treasury,  shall,  as  soon  as  practicable, 
make  provisions  for  the  insurance  by  the  United  States  of  American  vessels, 
their  freight  and  passage  moneys,  and  cargoes  shipped  or  to  be  shipped 
therein,  against  loss  or  damage  by  the  risks  of  war,  whenever  it  shall  appear 
to  the  Secretary  that  American  vessels,  shippers,  or  importers  in  American 
vessels  are  unable  in  any  trade  to  secure  adequate  war  risk  insurance  on 
reasonable  terms. 

Sec.  3,  That  the  Bureau  of  War  Risk  Insurance,  with  the  approval  of  the 
Secretary  of  the  Treasury,  is  hereby  authorized  to  adopt  and  publish  a  form 
of  war  risk  policy,  and  to  fix  reasonable  rates  of  premium  for  the  insurance 
of  American  vessels,  their  freight  and  passage  moneys  and  cargoes  against 
war  risks,  which  rates  shall  be  subject  to  such  change,  to  each  port  and  for 
each  class,  as  the  Secretary  shall  find  may  be  required  by  the  circumstances. 
The  proceeds  of  the  aforesaid  premiums  when  received  shall  be  covered  into 
the  Treasury  of  the  United  States. 

249 


250        EFFECTS  OF  THE  WAR  UPON  INSURANCE 

Sec.  4.  That  the  Bureau  of  War  Risk  Insurance,  with  the  approval  of  the 
Secretary  of  the  Treasury,  shall  have  power  to  make  any  and  all  rules  and 
regulations  necessary  for  carrying  out  the  purposes  of  this  Act. 

Sec.  5.  That  the  Secretary  of  the  Treasury  is  authorized  to  establish  an 
advisory  board,  to  consist  of  three  members  skilled  in  the  practices  of  war 
risk  insurance,  for  the  purpose  of  assisting  the  Bureau  of  War  Risk  Insur- 
ance in  fixing  rates  of  premium  and  in  adjustment  of  claims  for  losses,  and 
generally  in  carrying  out  the  purposes  of  this  Act;  the  compensation  of  the 
members  of  said  board  to  be  determined  by  the  Secretary  of  the  Treasury, 
but  not  to  exceed  $25  a  day  each,  while  actually  employed.  In  the  event 
of  disagreement  as  to  the  claim  for  losses,  or  amount  thereof,  between  the 
said  bureau  and  the  parties  to  such  contract  of  insurance,  an  action  on  the 
claim  may  be  brought  against  the  United  States  in  the  District  Court  of  the 
United  States,  sitting  in  admiralty,  in  the  district  in  which  the  claimant  or 
his  agent  may  reside. 

Sec.  6.  That  the  Director  of  the  Bureau  of  War  Risk  Insurance,  upon  the 
adjustment  of  any  claims  for  losses  in  respect  of  which  no  action  shall  have 
been  begun,  shall,  on  approval  of  the  Secretary  of  the  Treasury,  promptly 
pay  such  claim  for  losses  to  the  party  in  interest;  and  the  Secretary  of  the 
Treasury  is  directed  to  make  provision  for  the  speedy  adjustment  of  claims 
for  losses  and  also  for  the  prompt  notification  of  parties  in  interest  of  the 
decisions  of  the  bureau  on  their  claims. 

Sec.  7.  That  for  the  purpose  of  paying  losses  accruing  under  the  provi- 
sions of  this  Act  there  is  hereby  appropriated,  out  of  any  money  in  the 
Treasury  of  the  United  States  not  otherwise  appropriated,  the  sum  of 
$S,oco,ooo. 

Sec.  8.  That  there  is  hereby  appropriated,  for  the  purpose  of  defraying 
the  expenses  of  the  estabhshment  and  maintenance  of  the  Bureau  of  War 
Risk  Insurance,  including  the  payment  of  salaries  herein  authorized  and 
other  personal  services  in  the  District  of  Columbia,  out  of  any  money  in  the 
Treasury  of  the  United  States  not  otherwise  appropriated,  the  sum  of 
$100,000. 

Sec.  9.  That  the  President  is  authorized  whenever,  in  his  judgment,  the 
necessity  of  further  war  insurance  by  the  United  States  shall  have  ceased  to 
exist,  to  suspend  the  operations  of  this  Act  in  so  far  as  it  authorizes  insur- 
ance by  the  United  States  against  loss  or  damage  by  risks  of  war,  which 
suspension  shall  be  made,  at  any  event,  within  two  years  after  the  passage 
of  this  Act,  but  shall  not  afifect  any  insurance  outstanding  at  the  time  or  any 
claims  pending  adjustment.  For  the  purpose  of  the  final  adjustment  of  any 
such  outstanding  insurance  or  claims,  the  Bureau  of  War  Risk  Insurance 
may,  in  the  discretion  of  the  President,  be  continued  in  existence  a  further 
period  not  exceeding  one  year. 

Sec.  10.  That  a  detailed  statement  of  all  expenditures  under  this  Act  and 
of  all  receipts  hereunder  shall  be  submitted  to  Congress  at  the  beginning  of 
each  regular  session. 

Sec.  II.   That  this  Act  shall  take  effect  from  and  after  its  passage. 

Approved,  September  2,  1914. 


APPENDIX   A  251 

(W.  R.  I.  I.) 

Instructions  to  Collectors  of  Customs  and  Others  Concerned  Relating   to 
Applications  for  Government  IV ar  Risk  Insurance 

Treasury  Department,  September  4,  1914. 

VESSELS 

1.  Applications  for  insurance  on  vessels  under  the  American  flag  will  be 
accepted  for  periods  of  ninety  days  or  for  voyages  commencing  on  and  after 
the  date  hereof. 

2.  The  only  risks  that  will  be  covered  are  those  included  in  the  form  of 
policy  to  be  issued  by  the  Bureau  of  War  Risk  Insurance,  as  per  copy  sent 
to  collectors  of  customs  and  others. 

3.  Applications  for  vessel  policies  must  be  made  direct  to  the  Bureau  of 
War  Risk  Insurance,  Treasury  Department,  Washington,  D.  C.  Policies  will 
be  issued  in  Washington  only,  and  no  agent  or  representative  of  the  Gov- 
ernment may  bind  or  otherwise  accept  insurance  unless  specially  authorized 
by  the  bureau  at  Washington. 

4.  The  rates  of  premium  charged  may  be  had  upon  application  to  the 
Bureau  of  War  Risk  Insurance. 

5.  The  Bureau  of  War  Risk  Insurance  is  not  bound  by  any  errors  made 
in  the  calculating  of  the  premium  or  in  filling  in  the  form.  Should  error 
be  subsequently  discovered  a  readjustment  must  be  made. 

6.  All  applications  for  insurance  must  be  made  personally  by  the  insured 
or  his  representative. 

7.  Collectors  of  customs  and  others  should  familiarize  themselves  with 
the  conditions  appearing  on  the  forms  of  applications  and  sample  policies 
sent  to  them. 

W.  G.  McAdoo, 
Secretary  of  the  Treasury. 


(W.  R.  I.  2.) 

Instructions  to  Collectors  of  Customs  and  Others  Concerned  Relating  to 
Applications  for  Government  War  Risk  Insurance 

Treasury  Department,  September  4,  1914. 

CARGO 

1.  Applications  for  insurance  may  be  made  to  the  collector  of  customs  or 
his  duly  authorized  deputy  or  to  the  deputy  collector  in  charge  of  any  port 
of  entry. 

2.  Applications  for  insurance  will  be  accepted  only  in  respect  to  cargoes 
shipped  or  voyages  commencing  on  and  after  the  date  hereof. 


252        EFFECTS  OF  THE  WAR  UPON  INSURANCE 

3.  The  only  risks  that  will  be  covered  are  those  included  in  the  form  of 
policy  to  be  issued  by  the  Bureau  of  War  Risk  Insurance,  as  per  copy  sent 
to  collectors  of  customs  and  others. 

4.  A  policy  will  be  issued  for  each  risk,  but  only  upon  confirmed  acceptance 
from  the  Bureau  of  War  Risk  Insurance,  Washington,  D.  C. 

5.  Each  request  for  insurance  must  be  submitted  by  the  collector  or  deputy 
collector  to  the  Bureau  of  War  Risk  Insurance  by  wire,  and  must  state  the 
name  of  the  vessel,  the  nature  of  the  cargo,  amount  of  insurance  required, 
the  destination,  and  approximate  date  of  sailing.  A  rate  for  acceptance  will 
be  wired  to  the  collector  by  the  bureau.  If  the  rate  quoted  is  accepted  by 
the  applicant,  an  application  shall  be  made  in  duplicate  upon  the  form  pre- 
scribed, the  original  to  be  signed  by  the  applicant  or  his  duly  authorized 
representative  and  the  duplicate  application  to  be  signed  by  the  collector  or 
his  authorized  deputy  and  given  to  the  applicant.  The  original  is  to  be  sent 
by  the  first  mail  to  the  Bureau  of  War  Risk  Insurance  at  Washington,  where 
a  policy  will  be  issued  with  all  possible  dispatch  and  mailed  to  the  collector 
of  customs,  who  will  in  turn  deliver  it  to  the  assured  upon  his  sbrrender  of 
the  duplicate  application. 

6.  No  signed  application  shall  be  delivered  to  the  assured  until  the  rate 
quoted  by  the  bureau  is  accepted ;  and  in  no  case  shall  any  signed  application 
be  delivered  until  the  premium  is  paid.  Checks  shall  be  made  payable  to 
the  Treasurer  of  the  United  States  and  forwarded  with  the  application.  All 
checks  must  be  certified. 

7.  The  collector  of  customs  shall  fully  satisfy  himself  before  submitting 
any  war  risk  that  the  applicant  has  marine  insurance  in  an  insurance  com- 
pany or  companies  on  the  cargo  on  which  he  wishes  war  risk  insurance. 

8.  The  amount  insured  against  war  risk  can  not,  in  any  circumstances, 
exceed  the  amount  insured  against  marine  risks.  If  the  applicant  is  unable 
to  state  definitely  the  amount  to  be  insured,  he  shall  declare  a  provisional 
amount,  which  may  not  be  increased,  but  which  may  be  reduced,  upon  receipt 
of  definite  advice,  to  an  amount  not  less  than  the  total  amount  insured  under 
marine  policies.  Premiums  shall  be  paid  on  this  provisional  amount,  and  if 
the  amount  is  reduced,  when  final  particulars  are  known,  the  excess  of  such 
premium  will  be  returned  to  the  assured  by  the  Treasury  Department. 

9.  The  rate  of  premium  charged  will  be  made  from  day  to  day  by  the 
Bureau  of  War  Risk  Insurance  and  may  be  had  upon  application  to  the 
bureau.    The  rate  will  vary  for  the  different  voyages  and  the  cargoes  insured. 

10.  The  Bureau  of  War  Risk  Insurance  will  not  be  bound  by  any  errors 
made  in  the  calculation  of  the  premium  or  in  filling  in  the  form.  Should 
error  be  subsequently  discovered,  a  readjustment  must  be  made. 

11.  All  applications  for  insurance  must  be  made  personally  by  the  insurer 
or  his  duly  authorized  representatives. 

12.  Customs  officials  should  familiarize  themselves  with  the  conditions 
appearing  on  the  forms  of  applications  and  sample  policies  sent  to  col- 
lectors of  customs  and  others. 

W.  G.  McAdoo, 
Secretary  of  the  Treasury. 


APPENDIX  B 

[Public — No.  20 — 65TH  Congress] 

[S.  2133] 

An  Act  To  amend  an  Act  entitled  "  An  Act  to  authorize  the  establishment 
of  a  Bureau  of  War  Risk  Insurance  in  the  Treasury  Department,"  approved 
September  second,  nineteen  hundred  and  fourteen,  and  for  other  purposes. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United 
States  of  America  in  Congress  assembled.  That  the  first  section  of  the  Act 
entitled  "  An  Act  to  authorize  the  establishment  of  a  Bureau  of  War  Risk 
Insurance  in  the  Treasury  Department,"  approved  September  second,  nine- 
teen hundred  and  fourteen,  is  hereby  amended  to  read  as  follows : 

"  That  there  is  established  in  the  Treasury  Department  a  bureau  to  be 
known  as  the  Bureau  of  War  Risk  Insurance,  the  director  of  which  shall  be 
entitled  to  a  salary  at  the  rate  of  $5000  per  annum." 

Sec.  2.   That  section  two  of  such  Act  is  hereby  amended  to  read  as  follows : 

"  Sec.  2.  That  the  said  Bureau  of  War  Risk  Insurance,  subject  to  the  gen- 
eral direction  of  the  Secretary  of  the  Treasury,  shall,  as  soon  as  practicable, 
make  provisions  for  the  insurance  by  the  United  States  of  American  ves- 
sels, their  freight  and  passage  moneys,  cargoes  shipped  or  to  be  shipped 
therein,  and  personal  effects  of  the  masters,  officers,  and  crews  thereof 
against  loss  or  damage  by  the  risks  of  war,  whenever  it  shall  appear  to  the 
Secretary  that  American  vessels,  shippers  or  importers  in  American  vessels, 
or  the  masters,  officers,  or  crews  of  such  vessels,  are  unable  in  any  trade  to 
secure  adequate  war-risk  insurance  on  reasonable  terms. 

"The  Bureau  of  War  Risk  Insurance,  subject  to  the  general  direction  of 
the  Secretary  of  the  Treasury,  shall,  as  soon  as  practicable,  make  provisions 
for  the  insurance  by  the  United  States,  as  further  provided  in  section 
three  a,  of  masters,  officers,  and  crews  of  American  merchant  vessels  against 
loss  of  life  or  personal  injury  by  the  risks  of  war,  and  for  compensation 
during  detention  following  capture  by  enemies  of  the  United  States  when- 
ever it  shall  appear  to  the  Secretary  that  in  any  trade  the  need  for  such 
insurance  exists." 

Sec.  3.  That  there  is  hereby  added  to  such  Act  a  new  section,  to  be  known 
as  section  two  a,  to  read  as  follows : 

"  Sec.  2a.  That  the  Bureau  of  War  Risk  Insurance,  with  the  approval 
of  the  Secretary  of  the  Treasury,  is  hereby  authorized  to  make  provisions 
for  the  reinsurance  by  the  United  States  of  vessels  of  foreign  friendly  flags 
or  their  cargoes,  or  both,  when  such  vessels  or  their  cargoes  are  insured  by 
the  Government  of  any  country  which  is  at  war  with  an  enemy  of  the 
United  States ;  and,  further,  to  reinsure  with  the  Governments  of  any  coun- 
tries which  are  at  war  with  an  enemy  of  the  United  States  American  ves- 
sels and  their  cargoes." 

253 


254  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

Sec.  4.  That  section  three  of  such  Act  is  hereby  amended  to  read  as 
follows : 

"  Sec.  3.  That  the  Bureau  of  War  Risk  Insurance,  with  the  approval  of 
the  Secretary  of  the  Treasury,  is  hereby  authorized  to  adopt  and  publish 
forms  of  war-risk  policies  and  to  fix  reasonable  rates  of  premium  for  the 
policies  which  it  is  authorized  to  issue  under  this  Act,  which  rates  shall  be 
subject  to  such  change  to  each  port  and  for  each  class  as  the  Secretary  shall 
find  may  be  required  by  the  circumstances.  All  proceeds  of  the  aforesaid 
premium  and  from  salvage  which  have  been  or  are  hereafter  received  shall 
be  covered  into  the  Treasury  of  the  United  States  to  the  credit  of  the  Bureau 
of  War  Risk  Insurance,  and  in  addition  to  all  other  appropriations  made 
under  this  Act  are  hereby  permanently  appropriated  for  the  purpose  of 
paying  losses  and  return  premiums  accruing  under  this  Act." 

Sec.  5.  That  there  is  hereby  added  to  such  Act  a  new  section,  to  be  known 
as  section  three  a,  to  read  as  follows : 

"  Sec.  3a.  That  whenever  it  shall  appear  to  the  Secretary  of  the  Treasury 
that  the  effecting  of  such  insurance  is  desirable  in  the  national  interest  in 
the  case  of  vessels  engaged  in  any  trade,  the  owner  of  every  American 
merchant  vessel  engaged  in  such  trade  shall  insure  the  master,  officers,  and 
crew  of  such  vessel  against  loss  of  life  or  personal  injury  from  war  risks 
as  well  as  for  compensation  during  detention  by  an  enemy  of  the  United 
States  following  capture. 

"  Such  insurance  shall  be  effected  either  with  the  Bureau  of  War  Risk 
Insurance  or  in  insurance  companies,  and  on  terms  satisfactory  to  the  Secre- 
tary of  the  Treasury. 

"  Such  insurance  shall  provide,  and  the  Bureau  of  War  Risk  Insurance 
is  authorized  to  write  policies  so  providing — 

"  (a)  In  case  of  death,  permanent  disability  which  prevents  the  person 
injured  from  performing  any  and  every  kind  of  duty  pertaining  to  his  occu- 
pation, or  the  loss  of  both  hands,  both  arms,  both  feet,  both  legs,  or  both 
eyes  or  any  two  thereof,  for  the  payment  of  an  amount  equivalent  to  one 
year's  earnings,  or  to  twelve  times  the  monthly  earnings  of  the  insured,  as 
fixed  in  the  articles  for  the  voyage  (hereinafter  referred  to  as  the  principal 
sum),  but  in  no  case  shall  such  amount  be  more  than  $5000  or  less  than 
$1500; 

"  (b)  In  case  of  any  of  the  following  losses,  for  the  payment  of  the  per-' 
centage  of  the  principal  sum  indicated  in  the  following  tables: 

"  One  hand,  fifty  per  centum  ; 

"  One  arm,  sixty-five  per  centum ; 

"  One  foot,  fifty  per  centum  ; 

"  One  leg,  sixty-five  per  centum ; 

"  One  eye,  forty-five  per  centum ; 

"  Total  destruction  of  hearing,  fifty  per  centum ; 

"  That  the  Bureau  of  War  Risk  Insurance  may  include  in  its  policy  under- 
takings to  pay  specified  percentages  of  the  principal  sum  for  other  losses  or 
disabilities ;  and 

"  (c)  In  case  of  detention  by  an  enemy  of  the  United  States,  following 


APPENDIX    B  255 

capture,  for  the  payment  during  the  continuance  of  such  detention  of  com- 
pensation at  the  same  rate  as  the  earnings  of  the  insured  immediately  pre- 
ceding such  detention,  to  be  determined  in  substantially  the  same  manner  as 
provided  in  subdivision  (a)  of  this  section. 

"  The  aggregate  payments  under  this  section  in  respect  to  any  one  person 
shall  not  exceed  the  amount  of  the  principal  sum. 

■'  Payments  provided  for  in  this  section  shall  be  made  only  to  the  master, 
officer,  or  member  of  the  crew  concerned,  except  that  a  payment  for  loss 
of  life  shall  be  made  to  the  estate  of  the  insured  for  distribution  to  his 
family  free  from  liability  of  debt,  and  payment  on  account  of  detention  by 
an  enemy  following  capture  shall  be  made  to  dependents  of  the  person 
detained,  if  designated  by  him. 

"  No  claim  under  this  section  shall  be  valid  unless  made  by  the  master, 
officer,  or  member  of  the  crew  concerned,  or  his  estate,  or  a  person  desig- 
nated under  this  section,  within  two  years  after  the  date  on  which  the  Presi- 
dent suspends  the  operation  of  this  Act  in  so  far  as  it  authorizes  insurance 
by  the  United  States." 

Sec.  6.  That  there  is  hereby  added  to  such  Act  a  new  section  to  be  known 
as  section  three  b,  to  read  as  follows : 

"  Sec.  3b.  That  in  the  event  of  failure  of  the  owner  of  any  vessel  to 
effect  insurance  of  the  master,  officers,  and  crew  of  such  vessel  prior  to  sail- 
ing, in  accordance  with  section  three  a  of  this  Act,  the  Secretary  of  the 
Treasury  is  hereby  authorized  to  effect  such  insurance  with  the  Bureau  of 
War  Risk  Insurance  at  the  expense  of  the  owner  of  such  vessel,  and  the 
latter  shall  be  liable  for  such  expense  and,  in  addition,  to  a  penalty  of  not 
exceeding  $1000.  The  amount  of  such  premium,  with  interest  and  of  the 
penalty  and  of  all  costs,  shall  be  a  lien  on  the  vessel." 

Sec.  7.   That  section  five  of  such  Act  is  hereby  amended  to  read  as  follows : 

"  Sec.  5.  That  the  Secretary  of  the  Treasury  is  authorized  to  establish  an 
advisory  board,  to  consist  of  three  members  skilled  in  the  practices  of  war- 
risk  insurance,  for  the  purpose  of  assisting  the  Bureau  of  War  Risk  Insur- 
ance in  fixing  rates  of  premium  and  in  adjustment  of  claims  for  losses,  and 
generally  in  carrying  out  the  purposes  of  this  Act;  the  compensation  of  the 
members  of  said  board  to  be  determined  by  the  Secretary  of  the  Treasury, 
but  not  to  exceed  $20  a  day  each,  while  actually  employed.  He  is  likewise 
authorized  to  appoint  two  persons  skilled  in  the  practices  of  accident  insur- 
ance for  the  purpose  of  assisting  the  Bureau  of  War  Risk  Insurance  in  the 
adjustment  of  claims  for  death,  personal  injury,  or  detention ;  the  compensa- 
tion of  the  persons  so  appointed  to  be  determined  by  the  Secretary  of  the 
Treasury,  but  not  to  exceed  $20  a  day  each,  while  actually  employed.  In 
the  event  of  disagreement  as  to  the  claim  for  losses,  or  amount  thereof, 
between  the  said  bureau  and  the  parties  to  such  contract  of  insurance,  an 
action  on  the  claim  may  be  brought  against  the  United  States  in  the  district 
court  of  the  United  States,  sitting  in  admiralty,  in  the  district  in  which  the 
claimant  or  his  agent  may  reside." 

Sec.  8.  That  there  is  hereby  added  to  such  Act  a  new  section  to  be  known 
as  section  five  a,  to  read  as  follows : 


256  EFFECTS   OF   THE   WAR   UPON   INSURANCE 

"  Sec.  5a.  No  claim  agent  or  attorney  shall  be  entitled  to  receive  any  com- 
pensation whatever  for  services  in  the  collection  of  claims  against  the 
Bureau  of  War  Risk  Insurance  for  death,  personal  injury,  or  detention, 
except  when  proceedings  are  taken  in  accordance  with  section  five  in  a  dis- 
trict court  of  the  United  States,  in  which  case  the  judge  shall,  as  a  part  of 
his  determination  and  order,  settle  and  determine  the  amount  of  compensa- 
tion not  to  exceed  ten  per  centum  of  amount  recovered,  to  be  paid  by  the 
claimant  on  behalf  of  whom  such  proceedings  are  instituted  to  his  legal 
adviser  or  advisers,  and  it  shall  be  unlawful  for  any  lawyer  or  other  person 
acting  in  that  behalf  to  ask  for,  contract  for,  or  receive  any  larger  sum  than 
the  amount  so  fixed." 

Sec.  9.  That  section  seven  of  such  Act  is  hereby  amended  to  read  as 
follows  : 

.  "  Sec.  7.  That  for  the  purpose  of  paying  losses  and  return  premiums 
accruing  under  the  provisions  of  this  Act  there  is  hereby  appropriated  out 
of  any  money  in  the  Treasury  of  the  United  States  not  otherwise  appro- 
priated, the  sum  of  $50,000,000." 

Sec.  10.  That  section  eight  of  such  Act  is  hereby  amended  to  read  as 
follows : 

"  Sec.  8.  That  there  is  hereby  appropriated,  for  the  purpose  of  defraying 
the  expenses  of  the  establishment  and  maintenance  of  the  Bureau  of  War 
Risk  Insurance,  including  the  payment  of  salaries  herein  authorized  and 
other  personal  services,  and  for  the  purchase  of  necessary  books  of  refer- 
ence, periodicals,  etc.,  that  may  be  paid  for  in  advance  out  of  any  money 
in  the  Treasury  of  the  United  States  not  otherwise  appropriated,  the  sum 
of  $250,000." 

Sec.  II.  That  section  nine  of  such  Act  is  hereby  amended  to  read  as 
follows : 

"  Sec.  9.  That  the  President  is  authorized  whenever  in  his  judgment  the 
necessity  of  further  war  insurance  by  the  United  States  shall  have  ceased 
to  exist  to  suspend  the  operation  of  the  Act,  in  so  far  as  it  authorizes  insur- 
ance by  the  United  States  against  loss  or  damage  by  risks  of  war,  which 
suspension  shall  be  made,  in  any  event,  within  four  years  after  the  passage 
of  this  Act,  but  shall  not  affect  any  insurance  outstanding  at  the  time  or  any 
claims  pending  adjustment.  For  the  purpose  of  the  final  adjustment  of  any 
such  outstanding  insurance  or  claims,  the  Bureau  of  War  Risk  Insurance 
may,  in  the  discretion  of  the  President,  be  continued  in  existence  a  further 
period  not  exceeding  three  years." 

Sec.  12.  That  the  Act  entitled  "  An  Act  to  amend  an  Act  entitled  '  An  Act 
to  authorize  the  establishment  of  a  Bureau  of  War  Risk  Insurance  in  the 
Treasury  Department,'  approved  September  second,  nineteen  hundred  and 
fourteen,"  approved  August  eleventh,  nineteen  hundred  and  sixteen,  and  the 
Act  entitled  "  An  Act  to  amend  an  Act  entitled  '  An  Act  to  authorize  the 
establishment  of  a  Bureau  of  War  Risk  Insurance  in  the  Treasury  Depart- 
ment,' approved  September  second,  nineteen  hundred  and  fourteen."  approved 
March  third,  nineteen  hundred  and  seventeen,  are  hereby  repealed. 

Approved,  June  12,  1917. 


APPENDIX  C 

[PuBuc — No.  90 — 6sTH  Congress] 
[H.  R.  5723] 

An  Act  To  amend  an  Act  entitled  "An  Act  to  authorize  the  establishment 
of  a  Bureau  of  War  Risk  Insurance  in  the  Treasury  Department,"  approved 
September  second,  nineteen  hundred  and  fourteen,  and  for  other  purposes. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United 
States  of  America  in  Congress  assembled.  That  the  first  section  of  the  Act 
entitled  "  An  Act  to  authorize  the  establishment  of  a  Bureau  of  War  Risk 
Insurance  in  the  Treasury  Department,"  approved  September  second,  nine- 
teen hundred  and  fourteen,  as  amended,  is  hereby  amended  to  read  as  follows : 

"  Article  I 

"  Section  i.  That  there  is  established  in  the  Treasury  Department  a 
Bureau  to  be  known  as  the  Bureau  of  War  Risk  Insurance,  the  director  of 
which  shall  receive  a  salary  at  the  rate  of  $5000  per  annum. 

"  That  there  be  in  such  bureau  a  Division  of  Marine  and  Seamen's  Insur- 
ance and  a  Division  of  Military  and  Naval  Insurance  in  charge  of  a  com- 
missioner of  Marine  and  Seamen's  Insurance  and  a  commissioner  of  Mili- 
tary and  Naval  Insurance,  respectively,  each  of  whom  shall  receive  a  salary 
of  $4000  per  annum." 

Sec.  2.  That  such  Act  of  September  second,  nineteen  hundred  and  four- 
teen, as  amended,  is  hereby  amended  by  adding  new  sections,  as  follows : 

"  Sec.  12.  That  sections  two  to  seven,  inclusive,  and  section  nine,  shall  be 
construed  to  refer  only  to  the  Division  of  Marine  and  Seamen's  Insurance. 

"  Sec.  13.  That  the  director,  subject  to  the  general  direction  of  the  Secre- 
tary of  the  Treasury,  shall  administer,  execute,  and  enforce  the  provisions 
of  this  Act,  and  for  that  purpose  have  full  power  and  authority  to  make 
rules  and  regulations,  not  inconsistent  with  the  provisions  of  this  Act,  neces- 
sary or  appropriate  to  carry  out  its  purposes,  and  shall  decide  all  questions 
arising  under  the  Act,  except  as  otherwise  provided  in  sections  five  and  four 
hundred  and  five.  Wherever  under  any  provision  or  provisions  of  the  Act 
regulations  are  directed  or  authorized  to  be  made,  such  regulations,  unless 
the  context  otherwise  requires,  shall  or  may  be  made  by  the  director,  subject 
to  the  general  direction  of  the  Secretary  of  the  Treasury.  The  director  shall 
adopt  reasonable  and  proper  rules  to  govern  the  procedure  of  the  divisions, 
to  regulate  the  matter  of  the  compensation,  if  any,  but  in  no  case  to  exceed 
ten  per  centum,  to  be  paid  to  claim  agents  and  attorneys  for  services  in 
connection  with  any  of  the  matters  provided  for  in  articles  two,  three, 
and  four,  and  to  regulate  and  provide  for  the  nature  and  extent  of  the  proofs 

857 


258  EFFECTS   OF    THE   WAR    UPON    INSURANCE 

and  evidence  and  the  method  of  taking  and  furnishing  the  same  in  order  to 
establish  the  right  to  benefits  of  allowance,  allotment,  compensation,  or  insur- 
ance provided  for  in  this  Act,  the  forms  of  application  of  those  claiming  to 
be  entitled  to  such  benefits,  the  method  of  making  investigations  and  medical 
examinations,  and  the  manner  and  form  of  adjudications  and  awards. 

"  Sec.  14.  That  the  bureau  and  its  divisions  shall  have  such  deputies, 
assistants,  actuaries,  clerks,  and  other  employees  as  may  be  from  time  to 
time  provided  by  Congress.  The  bureau  shall,  by  arrangement  with  the 
Secretary  of  War  and  the  Secretary  of  the  Navy,  respectively,  make  use  of 
the  services  of  surgeons  in  the  Army  and  Navy.  The  Secretary  of  the  Treas- 
ury is  authorized  to  establish  an  advisory  board  consisting  of  three  members 
skilled  in  the  practice  of  insurance  against  death  or  disability  for  the  pur- 
pose of  assisting  the  Division  of  Military  and  Naval  Insurance  in  fixing 
premium  rates  and  in  the  adjustment  of  claims  for  losses  under  the  contracts 
of  insurance  provided  for  in  article  four  and  in  adjusting  claims  for  com- 
pensation under  article  three;  compensation  for  the  persons  so  appointed  to 
be  determined  by  the  Secretary  of  the  Treasury,  but  not  to  exceed  $20  a  day 
each  while  actually  employed. 

"  Sec.  15.  That  for  the  purposes  of  this  Act,  the  director,  commissioners, 
and  deputy  commissioners  shall  have  power  to  issue  subpoenas  for  and  compel 
the  attendance  of  witnesses  within  a  radius  of  one  hundred  miles,  to  require 
the  production  of  books,  papers,  documents,  and  other  evidence,  to  admin- 
ister oaths  and  to  examine  witnesses  upon  any  matter  within  the  jurisdiction 
of  the  bureau.  The  director  may  obtain  such  information  and  such  reports 
from  officials  and  employees  of  the  departments  of  the  Government  of  the 
United  States  and  of  the  States  as  may  be  agreed  upon  by  the  heads  of  the 
respective  departments.  In  case  of  disobedience  to  a  subpoena,  the  bureau 
may  invoke  the  aid  of  any  district  court  of  the  United  States  in  requiring 
the  attendance  and  testimony  of  witnesses  and  the  production  of  docu- 
mentary evidence,  and  such  court,  within  the  jurisdiction  of  which  the 
inquiry  is  carried  on,  may,  in  case  of  contumacy  or  refusal  to  obey  a  subpoena 
issued  to  any  officer,  agent,  or  employee  of  any  corporation  or  other  person, 
issue  an  order  requiring  such  corporation  or  other  person  to  appear  before 
the  bureau,  or  to  give  evidence  touching  the  matter  in  question ;  and  any 
failure  to  obey  such  order  of  the  court  may  be  punished  by  such  court  as  a 
contempt  thereof.  Any  person  so  required  to  attend  as  a  witness  shall  be 
allowed  and  paid  the  same  fees  and  mileage  as  are  paid  witnesses  in  the 
district  courts  of  the  United  States. 

"  Sec.  16.  That  the  director  shall  submit  annually  to  the  Secretary  of  the 
Treasury  estimates  of  the  appropriations  necessary  for  the  work  of  the 
bureau. 

"  Sec.  17.  That  for  the  purpose  of  carrying  out  the  provisions  of  this 
Act  there  is  hereby  appropriated,  out  of  any  moneys  in  the  Treasury  not 
otherwise  appropriated,  the  sum  of  $100,000,  for  the  payment  of  all  expenses 
incident  to  the  work  authorized  under  this  Act,  including  salaries  of  the 
director  and  commissioners  and  of  such  deputies,  assistants,  accountants, 
experts,  clerks,  and  other  employees  in  the  District  of  Columbia  or  elsewhere, 


APPENDIX    C  259 

as  the  Secretary  of  the  Treasury  may  deem  necessary,  traveling  expenses, 
rent  and  equipment  of  offices,  typewriters  and  exchange  of  same,  purchase 
of  law  books  and  books  of  reference,  printing  and  binding  to  be  done  at 
the  Government  Printing  Office,  and  all  other  necessary  expenses.  With  the 
exception  of  the  director,  the  commissioners,  and  such  special  experts  as  the 
Secretary  of  the  Treasury  may  from  time  to  time  find  necessary  for  the 
conduct  of  the  work  of  the  bureau,  all  employees  of  the  bureau  shall  be 
appointed  from  lists  of  eligibles  to  be  supplied  by  the  Civil  Service  Commis- 
sion and  in  accordance  with  the  civil-service  law.  Such  fees,  allowances, 
and  salaries  shall  be  the  same  as  are  paid  for  similar  services  in  other 
departments  of  the  Government. 

"  Sec.  18.  That  there  is  hereby  appropriated  from  any  money  in  the 
Treasury  not  otherwise  appropriated,  the  sum  of  $141,000,000,  to  be  known 
as  the  military  and  naval  family  allowance  appropriation,  for  the  payment 
of  the  family  allowances  provided  by  Article  II.  Payments  out  of  this 
appropriation  shall  be  made  upon  and  in  accordance  with  awards  by  the 
Commissioner  of  the  Division  of  Military  and  Naval  Insurance. 

*'  Sec.  19.  That  there  is  hereby  appropriated,  from  any  money  in  the  Treas- 
ury not  otherwise  appropriated,  the  sum  of  $12,150,000,  to  be  known  as  the 
military  and  naval  compensation  appropriation,  for  the  payment  of  the  com- 
pensation, funeral  expenses,  services,  and  supplies  provided  by  Article  III. 
Payments  out  of  this  appropriation  shall  be  made  upon  and  in  accordance 
with  awards  by  the  director. 

"  Sec.  20.  That  there  is  hereby  appropriated,  from  any  money  in  the 
Treasury  not  otherwise  appropriated,  the  sum  of  $23,000,000,  to  be  known 
as  the  military  and  naval  insurance  appropriation.  All  premiums  that  may 
be  collected  for  the  insurance  provided  by  the  provisions  of  Article  IV  shall 
be  deposited  and  covered  into  the  Treasury  to  the  credit  of  this  appropriation. 

"  Such  sum,  including  all  premium  payments,  is  hereby  made  available  for 
the  payment  of  the  liabilities  of  the  United  States  incurred  under  contracts 
of  insurance  made  under  the  provisions  of  Article  IV.  Payments  from  this 
appropriation  shall  be  made  upon  and  in  accordance  with  awards  by  the 
director. 

"  Sec.  21.  That  there  shall  be  set  aside  as  a  separate  fund  in  the  Treasury, 
to  be  known  as  the  military  and  naval  pay  deposit  fund,  all  sums  held  out 
of  pay  as  provided  by  section  two  hundred  and  three  of  this  Act.  Such  fund, 
including  all  additions,  is  hereby  made  available  for  the  payment  of  the  sums 
so  held  and  deposited,  with  interest,  as  provided  in  section  two  hundred  and 
three,  and  the  amount  necessary  to  pay  interest  is  hereby  appropriated. 

"  Sec.  22.  That  for  the  purpose  of  this  amendatory  Act  the  marriage  of 
the  claimant  to  the  person  on  account  of  whom  the  claim  is  made  shall  be 
shown — 

"  (i)  By  a  duly  verified  copy  of  a  public  or  church  record;  or 

"  (2)  By  the  affidavit  of  the  clergyman  or  magistrate  who  officiated ;  or 

"  (3)   By  the  testimony  of  two  or  more  eyewitnesses  to  the  ceremony;  or 

"  (4)  By  a  duly  verified  copy  of  the  church  record  of  baptism  of  the  chil- 
dren; or 


26o  EFFECTS   OF   THE   WAR   UPON   INSURANCE 

"  (S)  By  the  testimony  of  two  or  more  witnesses  who  know  that  the 
parties  lived  together  as  husband  and  wife,  and  were  recognized  as  such, 
and  who  shall  state  how  long,  within  their  knowledge,  such  relation  con- 
tinued: Provided,  That  marriages,  except  such  as  are  mentioned  in  section 
forty-seven  hundred  and  five  of  the  Revised  Statutes,  shall  be  proven  in  com- 
pensation or  insurance  cases  to  be  legal  marriages  according  to  the  law  of 
the  place  where  the  parties  resided  at  the  time  of  marriage  or  at  the  time 
when  the  right  to  compensation  or  insurance  accrued;  and  the  open  and 
notorious  illicit  cohabitation  of  a  widow  who  is  a  claimant  shall  operate  to 
terminate  her  right  to  compensation  or  insurance  from  the  commencement 
of  such  cohabitation :  Provided  further.  That  for  the  purpose  of  the  admin- 
istration of  Article  II  of  this  Act  marriage  shall  be  conclusively  presumed, 
in  the  absence  of  proof,  that  there  is  a  legal  spouse  living,  if  the  man  and 
woman  have  lived  together  in  the  openly  acknowledged  relation  of  husband 
and  wife  during  the  two  years  immediately  preceding  the  date  of  the  declara- 
tion of  war,  or  the  date  of  enlistment  or  of  entrance  into  or  employment  in 
active  service  in  the  military  or  naval  forces  of  the  United  States  if  subse- 
quent to  such  declaration." 

In  Articles  II,  III,  and  IV  of  this  Act  unless  the  context  otherwise 
requires — 

"  (i)  The  term  'child'  includes — 

"  (a)  A  legitimate  child. 

"  (b)  A  child  legally  adopted  more  than  six  months  before  the  enactment 
of  this  amendatory  Act  or  before  enlistment  or  entrance  into  or  employ- 
ment in  active  service  in  the  military  or  naval  forces  of  the  United  States, 
whichever  of  these  dates  is  the  later. 

"  (c)  A  stepchild,  if  a  member  of  the  man's  household. 

"  (d)  An  illegitimate  child,  but,  as  to  the  father,  only,  if  acknowledged  by 
instrument  in  writing  signed  by  him,  or  if  he  has  been  judicially  ordered  or 
decreed  to  contribute  to  such  child's  support,  and  if  such  child,  if  born  after 
December  thirty-first,  nineteen  hundred  and  seventeen,  shall  have  been  born 
in  the  United  States,  or  in  its  insular  possessions. 

"  (2)  The  term  '  grandchild '  means  a  child  as  above  defined  of  a  child 
as  above  defined. 

"  (3)  Except  as  used  in  section  four  hundred  and  one  and  in  section  four 
hundred  and  two  the  terms  '  child '  and  '  grandchild '  are  limited  to  unmar- 
ried persons  either  (a)  under  eighteen  years  of  age,  or  (b)  of  any  age,  if 
insane,  idiotic,  or  otherwise  permanently  helpless. 

"  (4)  The  term  '  parent '  includes  a  father,  mother,  grandfather,  grand- 
mother, stepfather  and  stepmother,  either  of  the  person  in  the  service  or  of 
the  spouse. 

"  (5)  The  terms  '  brother '  and  '  sister '  include  brothers  and  sisters  of  the 
half  blood  as  well  as  those  of  the  whole  blood,  stepbrothers  and  stepsisters 
and  brothers  and  sisters  through  adoption. 

"  (6)  The  term  '  commissioned  officer '  includes  a  warrant  ofl'icer,  but 
includes  only  an  officer  in  active  service  in  the  military  or  naval  forces  of 
the  United  States. 


APPENDIX    C  261 

"  (7)  The  terms  'man'  and  'enlisted  man'  mean  a  person,  whether  male 
or  female,  and  whether  enlisted,  enrolled,  or  drafted  into  active  service  in 
the  military  or  naval  forces  of  the  United  States,  and  include  noncommis- 
sioned and  petty  officers,  and  members  of  training  camps  authorized  by 
law. 

"  (8)  The  term  '  enlistment '  includes  voluntary  enlistment,  draft,  and 
enrollment  in  active  service  in  the  military  or  naval  forces  of  the  United 
States. 

"  (9)  The  term  'commissioner'  means  the  Commissioner  of  Military  and 
Naval  Insurance. 

"  (10)  The  term  'injury'  includes  disease. 

"  (ii)  The  term  'pay'  means  the  pay  for  service  in  the  United  States 
according  to  grade  and  length  of  service,  excluding  all  allowances. 

"(12)  The  term  'military  or  naval  forces'  means  the  Army,  the  Navy, 
the  Marine  Corps,  the  Coast  Guard,  the  Naval  Reserves,  the  National  Naval 
Volunteers,  and  any  other  branch  of  the  United  States  service  while  serving 
pursuant  to  law  with  the  Army  or  the  Navy. 

"  Sec.  23.  That  when,  by  the  terms  of  this  amendatory  Act,  any  payment 
is  to  be  made  to  a  minor,  other  than  a  person  in  the  military  or  naval  forces 
of  the  United  States,  or  to  a  person  mentally  incompetent,  such  payment 
shall  be  made  to  the  person  who  is  constituted  guardian  or  curator  by  the 
laws  of  the  State  or  residence  of  claimant,  or  is  otherwise  legally  vested 
with  responsibility  or  care  of  the  claimant. 

"  Sec.  24.  That  the  Bureau  of  War  Risk  Insurance,  so  far  as  practicable, 
shall  upon  request  furnish  information  to  and  act  for  persons  in  the  mili- 
tary or  naval  service,  with  respect  to  any  contracts  of  insurance  whether 
with  the  Government  or  otherwise,  as  may  be  prescribed  by  regulations. 
Said  bureau  may  upon  request  procure  from  and  keep  a  record  of  the  amount 
and  kind  of  insurance  held  by  every  commissioned  and  appointive  officer 
and  of  every  enlisted  man  in  the  military  or  naval  service  of  the  United 
States,  including  the  name  and  principal  place  of  business  of  the  company, 
society,  or  organization  in  which  such  insurance  is  held,  the  date  of  the  policy, 
amount  of  premium,  name  and  relationship  of  the  beneficiary,  and  such  other 
data  as  may  be  deemed  of  service  in  protecting  the  interests  of  the  insured 
and  beneficiaries. 

"  Sec.  25.  That  whoever  in  any  claim  for  family  allowance,  compensation, 
or  insurance,  or  in  any  document  required  by  this  Act  or  by  regulation  made 
under  this  Act,  makes  any  statement  of  a  material  fact  knowing  it  to  be 
false,  shall  be  guilty  of  perjury  and  shall  be  punished  by  a  fine  of  not  more 
than  $5000,  or  by  imprisonment  for  not  more  than  two  years,  or  both. 

"  Sec.  26.  That  if  any  person  entitled  to  payment  of  family  allowance  or 
compensation  under  this  Act,  whose  right  to  such  payment  under  this  Act 
ceases  upon  the  happening  of  any  contingency,  thereafter  fraudulently  accepts 
any  such  payment,  he  shall  be  punished  by  a  fine  of  not  more  than  $2C00, 
or  by  imprisonment  for  not  more  than  one  year,  or  both." 


262  EFFECTS   OF   THE   WAR   UPON    INSURANCE 


Article  II 

ALLOTMENTS  AND  FAMILY  ALLOWANCES 

Sec.  200.  That  the  provisions  of  this  article  shall  apply  to  all  enlisted  men 
in  the  military  or  naval  forces  of  the  United  States. 

Sec.  201.  That  allotment  of  pay  shall,  subject  to  the  conditions,  limita- 
tions, and  exceptions  hereinafter  specified,  be  compulsory  as  to  wife,  a  former 
wife  divorced  who  has  not  remarried  and  to  whom  alimony  has  been  decreed, 
and  a  child,  and  voluntary  as  to  any  other  person ;  but  on  the  written  consent 
of  the  wife  or  former  wife  divorced,  supported  by  evidence  satisfactory  to 
the  bureau  of  her  ability  to  support  herself  and  the  children  in  her  custody, 
the  allotment  for  her  and  for  such  children  may  be  waived;  and  on  the 
enlisted  man's  application  or  otherwise  for  good  cause  shown,  exemption 
from  the  allotment  may  be  granted  upon  such  conditions  as  may  be  pre- 
scribed by  regulations. 

The  monthly  compulsory  allotment  shall  be  in  an  amount  equal  to  the 
family  allowance  hereinafter  specified  except  that  it  shall  not  be  more  than 
one-half  the  pay,  or  less  than  $15;  but  for  a  wife  living  separate  and  apart 
under  court  order  or  written  agreement  or  for  a  former  wife  divorced,  it 
shall  not  exceed  the  amount  specified  in  the  court  order,  decree,  or  written 
agreement  to  be  paid  to  her.  For  an  illegitimate  child,  to  whose  support  the 
father  has  been  judicially  ordered  or  decreed  to  contribute,  it  shall  not 
exceed  the  amount  fixed  in  the  order  or  decree. 

If  there  be  an  allotment  for  a  wife  or  child,  a  former  wife  divorced  and 
who  has  not  remarried  shall  be  entitled  to  a  compulsory  allotment  only  out 
of  the  difference,  if  any,  between  the  allotment  for  the  wife  or  child  or  both 
and  one-half  of  the  pay. 

Sec.  202.  That  the  enlisted  man  may  allot  any  proportion  or  proportions 
or  any  fixed  amount  or  amounts  of  his  monthly  pay  or  of  the  proportion 
thereof  remaining  after  the  compulsory  allotment,  for  such  purposes  and 
for  the  benefit  of  such  person  or  persons  as  he  may  direct,  subject,  however, 
to  such  conditions  and  limitations  as  may  be  prescribed  under  regulations 
to  be  made  by  the  Secretary  of  War  and  the  Secretary  of  the  Navy, 
respectively. 

Sec.  203.  That  in  case  one-half  of  an  enlisted  man's  monthly  pay  is  not 
allotted,  regulations  to  be  made  by  the  Secretary  of  War  and  the  Secretary 
of  the  Navy,  respectively,  may  require,  under  such  circumstances  and  con- 
ditions as  may  be  prescribed  in  such  regulations,  that  any  proportion  of  such 
one-half  pay  as  is  not  allotted  shall  be  deposited  to  his  credit,  to  be  held 
during  such  period  of  his  service  as  may  be  prescribed.  Such  deposits  shall 
bear  interest  at  the  rate  of  four  per  centum  per  annum,  with  semiannual 
rests  and.  when  payable,  shall  be  paid  principal  and  interest  to  the  enlisted 
man,  if  living,  otherwise  to  any  beneficiary  or  beneficiaries  he  may  have 
designated,  or  if  there  be  no  such  beneficiary,  then  to  the  person  or  persons 


APPENDIX    C  263 

who  would  under  the  laws  of  the  State  of  his  residence  be  entitled  to  his 
personal  property  in  case  of  intestacy. 

Sec.  204.  That  a  family  allowance  of  not  exceeding  $50  per  month  shall 
be  granted  and  paid  by  the  United  States  upon  written  application  to  the 
bureau  by  such  enlisted  man  or  by  or  on  behalf  of  any  prospective  benefi- 
ciary, in  accordance  with  and  subject  to  the  conditions,  limitations,  and  excep' 
tions  hereinafter  specified. 

The  family  allowance  shall  be  paid  from  the  time  of  enlistment  to  death 
in  or  one  month  after  discharge  from  the  service,  but  not  for  more  than 
one  month  after  the  termination  of  the  present  war  emergency.  No  family 
allowance  shall  be  made  for  any  period  preceding  November  first,  nineteen 
hundred  and  seventeen.  The  payment  shall  be  subject  to  such  regulations  as 
may  be  prescribed  relative  to  cases  of  desertion  and  imprisonment  and  of 
missing  men. 

Subject  to  the  conditions,  limitations,  and  exceptions  hereinabove  and  here- 
inafter specified,  the  family  allowance  payable  per  month  .shall  be  as  follows : 

Class  A.  In  the  case  of  a  man,  to  his  wife  (including  a  former  wife 
divorced)   and  to  his  child  or  children: 

(a)  If  there  be  a  wife  but  no  child,  $15. 

(b)  If  there  be  a  wife  and  one  child,  $25. 

(c)  If  there  be  a  wife  and  two  children,  $32.50,  with  $5  per  month  addi- 
tional for  each  additional  child. 

(d)  If  there  be  no  wife,  but  one  child,  $5. 

(e)  If  there  be  no  wife,  but  two  children,  $12.50. 

(f)  If  there  be  no  wife,  but  three  children,  $20. 

(g)  If  there  be  no  wife,  but  four  children,  $30,  with  $5  per  month  addi- 
tional for  each  additional  child. 

Class  B.  In  the  case  of  a  man  or  woman,  to  a  grandchild,  a  parent, 
brother  or  sister : 

(a)  If  there  be  one  parent,  $10. 

(b)  If  there  be  two  parents,  $20. 

(c)  For  each  grandchild,  brother,  sister,  and  additional  parent,  $5. 
In  the  case  of  a  woman,  to  a  child  or  children : 

(d)  If  there  be  one  child,  $5. 

(e)  If  there  be  two  children,  $12.50. 

(f)  If  there  be  three  children,  $20. 

(g)  If  there  be  four  children,  $30,  with  $5  per  month  additional  for  each 
additional  child. 

Sec.  205.  That  family  allowances  for  members  of  Class  A  shall  be  paid 
only  if  and  while  a  compulsory  allotment  is  made  to  a  member  or  members 
of  such  class.  The  monthly  family  allowance  to  a  former  wife  divorced 
shall  be  payable  only  out  of  the  difference,  if  any,  between  the  monthly 
family  allowance  to  the  other  members  of  Class  A  and  the  sum  of  $50,  and 
only  then  if  alimony  shall  have  been  decreed  to  her.  For  a  wife  living 
separate  and  apart  under  court  order  or  written  agreement  or  to  a  former 
wife  divorced  the  monthly  allowance,  together  with  the  allotment,  if  any, 
shall  not  exceed  the  amount  specified  in  the  court  order,  decree,  or  written 


264  EFFECTS   OF   THE   WAR   UPON   INSURANCE 

agreement  to  be  paid  to  her.  For  an  illegitimate  child,  to  whose  support  the 
father  has  been  judicially  ordered  or  decreed  to  contribute,  it  shall  not  exceed 
the  amount  fixed  in  the  order  or  decree. 

Sec.  206.  That  family  allowances  to  members  of  Class  B  shall  be  granted 
only  if  and  while  the  member  is  dependent  in  whole  or  in  part  on  the 
enlisted  man,  and  then  only  if  and  while  the  enlisted  man  makes  a  monthly 
allotment  of  his  pay  for  such  member  or  members  equal  to  the  amount  of 
the  monthly  family  allowance  as  hereinabove  specified,  except  that — 

(a)  The  maximum  monthly  allotment  so  required  to  be  made  to  members 
of  Class  B  shall  be  one-half  of  his  pay. 

(b)  If  he  is  making  no  allotment  to  a  member  of  Class  A,  the  minimum 
monthly  allotment  so  designated  to  be  made  to  members  of  Class  B  shall  be 
$15  per  month. 

(c)  If  he  is  making  the  compulsory  allotment  to  a  member  of  Class  A, 
the  minimum  monthly  allotment  so  designated  to  be  made  to  members  of 
Class  B  shall  be  one-seventh  of  his  pay,  but  not  less  than  $5  per  month. 

On  the  enlisted  man's  application,  or  otherwise  for  good  cause  shown, 
exemption  from  this  additional  allotment  under  Class  B  as  a  condition  to  the 
allowance  may  be  granted,  upon  such  conditions  as  may  be  prescribed  by 
regulations. 

Sec.  207.  That  the  amount  of  the  family  allowance  to  members  of  Class  B 
shall  be  subject  to  each  of  the  following  limitations: 

(a)  If  an  allowance  is  paid  to  one  or  more  beneficiaries  of  Class  A,  the 
total  allowance  to  be  paid  to  the  beneficiaries  of  Class  B  shall  not  exceed 
the  difference  between  the  allowance  paid  to  the  beneficiaries  of  Class  A  and 
the  sum  of  $50. 

(b)  The  total  monthly  allowance  to  beneficiaries  of  Class  B  added  to  the 
enlisted  man's  monthly  allotment  to  them  shall  not  exceed  the  average  sum 
habitually  contributed  by  him  to  their  support  monthly  during  the  period  of 
dependency  but  not  exceeding  a  year  immediately  preceding  his  enlistment 
or  the  enactment  of  this  amendatory  Act. 

Sec.  208.  That  as  between  the  members  of  Class  A  and  as  between  the 
members  of  Class  B,  the  amount  of  the  allotment  and  family  allowance 
shall  be  apportioned  as  may  be  prescribed  by  regulations. 

Sec.  209.  The  War  and  Navy  Departments,  respectively,  shall  pay  over 
to  the  Treasury  Department  monthly  the  entire  amount  of  such  allotments 
for  distribution  to  the  beneficiaries,  and  the  allotments  and  family  allow- 
ances shall  be  paid  by  the  bureau  to  or  for  the  beneficiaries. 

Sec.  210.  That  upon  receipt  of  any  application  for  family  allowance  the 
commissioner  shall  make  all  proper  investigations  and  shall  make  an  award, 
on  the  basis  of  which  award  the  amount  of  the  allotments  to  be  made  by 
the  man  shall  be  certified  to  the  War  Department  or  Navy  Department,  as 
may  be  proper.  Whenever  the  commissioner  shall  have  reason  to  believe 
that  an  allowance  has  been  improperly  made  or  that  the  conditions  have 
changed,  he  shall  investigate  or  reinvestigate  and  may  modify  the  award. 
The  amount  of  each  monthly  allotment  and  allowance  shall  be  determined 
according  to  the  conditions  then  existing. 


APPENDIX    C  265 

Article  III 

COMPENSATION   FOR   DEATH  OR  DISABILITY 

Sec.  300.  That  for  death  or  disability  resulting  from  personal  injury  suf- 
fered or  disease  contracted  in  the  line  of  duty,  by  any  commissioned  officer 
or  enlisted  man  or  by  any  member  of  the  Army  Nurse  Corps  (female)  or 
of  the  Navy  Nurse  Corps  (female)  when  employed  in  the  active  service 
under  the  War  Department  or  Navy  Department,  the  United  States  shall 
pay  compensation  as  hereinafter  provided;  but  no  compensation  shall  be 
paid  if  the  injury  or  disease  has  been  caused  by  his  own  willful  misconduct. 

Sec.  301.   That  if  death  results  from  injury — 

If  the  deceased  leaves  a  widow  or  child,  or  if  he  leaves  a  widowed  mother 
dependent  upon  him  for  support,  the  monthly  compensation  shall  be  the 
following  amounts : 

(a)  For  a  widow  alone,  $25. 

(b)  For  a  widow  and  one  child,  $35. 

(c)  For  a  widow  and  two  children,  $47.50,  with  $5  for  each  additional 
child  up  to  two. 

(d)  If  there  be  no  widow,  then  for  one  child,  $20. 

(e)  For  two  children,  $30. 

(f)  For  three  children,  $40,  with  $5  for  each  additional  child  up  to  two. 

(g)  For  a  widowed  mother,  $20.  The  amount  payable  under  this  sub- 
division shall  not  be  greater  than  a  sum  which,  when  added  to  the  total 
amount  payable  to  the  widow  and  children,  does  not  exceed  $75.  This  com- 
pensation shall  be  payable  for  the  death  of  but  one  child,  and  no  compensa- 
tion for  the  death  of  a  child  shall  be  payable  if  such  widowed  mother  is  in 
receipt  of  compensation  under  the  provisions  of  this  article  for  the  death 
of  her  husband.  Such  compensation  shall  be  payable  whether  her  widow- 
hood arises  before  or  after  the  death  of  the  person  and  whenever  her  con- 
dition is  such  that  if  the  person  were  living  the  widowed  mother  would  have 
been  dependent  upon  him  for  support. 

If  the  death  occur  before  discharge  or  resignation  from  service,  the  United 
States  shall  pay  for  burial  expenses  and  the  return  of  body  to  his  home  a 
sum  not  to  exceed  $100,  as  may  be  fixed  by  regulations. 

The  payment  of  compensation  to  a  widow  or  widowed  mother  shall  con- 
tinue until  her  death  or  remarriage. 

The  payment  of  compensation  to  or  for  a  child  shall  continue  until  such 
child  reaches  the  age  of  eighteen  years  or  marries,  or  if  such  child  be  inca- 
pable, because  of  insanity,  idiocy  or  being  otherwise  permanently  helpless, 
then  during  such  incapacity. 

Whenever  the  compensation  payable  to  or  for  the  benefit  of  any  person 
under  the  provisions  of  this  section  is  terminated  by  the  happening  of  the 
contingency  upon  which  it  is  limited,  the  compensation  thereafter  for  the 
remaining  beneficiary  or  beneficiaries,  if  any,  shall  be  the  amount  which 
would  have  been  payable  to  them  if  they  had  been  the  sole  original  bene- 
ficiaries. 

As  between  the  widow  and  the  children  not  in  her  custody,  and  as  between 


266  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

children,  the  amount  of  the  compensation  shall  be  apportioned  as  may  be 
prescribed  by  regulations.    The  word  "  widow  "  as  used  in  this  section  shall 
.not  include  one  who  shall  have  married  the  deceased  later  than  ten  years 
after  the  time  of  injury. 

Sec.  302.   That  if  disability  results  from  the  injury — 
(i)  If  and  while  the  disability  is  total,  the  monthly  compensation  shall  be 
the  following  amounts : 

(a)  If  he  has  neither  wife  nor  child  living,  $30. 

(b)  If  he  has  a  wife  but  no  child  living,  $45. 

(c)  If  he  has  a  wife  and  one  child  living,  $55. 

(d)  If  he  has  a  wife  and  two  children  living,  $65. 

(e)  If  he  has  a  wife  and  three  or  more  children  living,  $75. 

(f)  If  he  has  no  wife  but  one  child  living,  $40,  with  $10  for  each  addi- 
tional child  up  to  two. 

(g)  If  he  has  a  widowed  mother  dependent  on  him  for  support,  then,  in 
addition  to  the  above  amounts,  $10. 

To  an  injured  person  who  is  totally  disabled  and  in  addition  So  helpless 
as  to  be  in  constant  need  of  a  nurse  or  attendant,  such  additional  sum  shall 
be  paid,  but  not  exceeding  $20  per  month,  as  the  director  may  deem  reason- 
able :  Provided,  however.  That  for  the  loss  of  both  feet  or  both  hands  or 
both  eyes,  or  for  becoming  totally  blind  or  helpless  and  permanently  bed- 
ridden from  causes  occurring  in  the  line  of  duty  in  the  service  of  the  United 
States,  the  rate  of  compensation  shall  be  $100  per  month :  Provided  further. 
That  no  allowance  shall  be  made  for  nurse  or  attendant. 

(2)  If  and  while  the  disability  is  partial,  the  monthly  compensation  shall  be 
a  percentage  of  the  compensation  that  would  be  payable  for  his  total  disa- 
bility, equal  to  the  degree  of  the  reduction  in  earning  capacity  resulting  from 
the  disability,  but  no  compensation  shall  be  payable  for  a  reduction  in  earn- 
ing capacity  rated  at  less  than  ten  per  centum. 

A  schedule  of  ratings  of  reductions  in  earning  capacity  from  specific 
injuries  or  combinations  of  injuries  of  a  permanent  nature  shall  be  adopted 
and  applied  by  the  bureau.  Ratings  may  be  as  high  as  one  hundred  per 
centum.  The  ratings  shall  be  based,  as  far  as  practicable,  upon  the  average 
impairments  of  earning  capacity  resulting  from  such  injuries  in  civil  occu- 
pations and  not  upon  the  impairment  in  earning  capacity  in  each  individual 
case,  so  that  there  shall  be  no  reduction  in  the  rate  of  compensation  for  indi- 
vidual success  in  overcoming  the  handicap  of  a  permanent  injury.  The 
bureau  shall  from  time  to  time  readjust  this  schedule  of  ratings  in  accord- 
ance with  actual  experience. 

(3)  In  addition  to  the  compensation  above  provided,  the  injured  person 
shall  be  furnished  by  the  United  States  such  reasonable  governmental 
medical,  surgical,  and  hospital  services  and  with  such  supplies,  including  arti- 
ficial limbs,  trusses,  and  similar  appliances,  as  the  director  may  determine  to 
be  useful  and  reasonably  necessary :  Provided,  That  nothing  in  this  Act 
shall  be  construed  to  affect  the  necessary  military  control  over  any  member 
of  the  military  or  naval  establishments  before  he  shall  have  been  discharged 
from  the  military  or  naval  service. 


APPENDIX    C  267 

(4)  The  amount  of  each  monthly  payment  shall  be  determined  according 
to  the  family  conditions  then  existing. 

Sec.  303.  That  every  person  applying  for  or  in  receipt  of  compensation 
for  disability  under  the  provisions  of  this  article  shall,  as  frequently  and  at 
such  times  and  places  as  may  be  reasonably  required,  submit  himself  to 
examination  by  a  medical  officer  of  the  United  States  or  by  a  duly  qualified 
physician  designated  or  approved  by  the  director.  He  may  have  a  duly  quali- 
fied physician  designated  and  paid  by  him  present  to  participate  in  such 
examination.  For  all  examinations  he  shall,  in  the  discretion  of  the  director, 
be  paid  his  reasonable  traveling  and  other  expenses  and  also  loss  of  wages 
incurred  in  order  to  submit  to  such  examination.  If  he  refuses  to  submit 
himself  for,  or  in  any  way  obstructs,  any  examination,  his  right  to  claim 
compensation  under  this  article  shall  be  suspended  until  such  refusal  or 
obstruction  ceases.  No  compensation  shall  be  payable  while  such  refusal  or 
obstruction  continues,  and  no  compensation  shall  be  payable  for  the  inter- 
vening period. 

Every  person  in  receipt  of  compensation  for  disability  shall  submit  to  any 
reasonable  medical  or  surgical  treatment  furnished  by  the  bureau  whenever 
requested  by  the  bureau ;  and  the  consequences  of  unreasonable  refusal  to 
submit  to  any  such  treatment  shall  not  be  deemed  to  result  from  the  injury 
compensated  for. 

Sec.  304.  That  in  cases  of  dismemberment,  of  injuries  to  sight  or  hearing, 
and  of  other  injuries  commonly  causing  permanent  disability,  the  injured 
person  shall  follow  such  course  or  courses  of  rehabilitation,  reeducation  and 
vocational  training  as  the  United  States  may  provide  or  procure  to  be  pro- 
vided. Should  such  course  prevent  the  injured  person  from  following  a  sub- 
stantially gainful  occupation  while  taking  same,  a  form  of  enlistment  may  be 
required  which  shall  bring  the  injured  person  into  the  military  or  naval 
service.  Such  enlistment  shall  entitle  the  person  to  full  pay  as  during  the 
last  month  of  his  active  service,  and  his  family  to  family  allowances  and 
allotment  as  hereinbefore  provided,  in  lieu  of  all  other  compensation  for 
the  time  being. 

In  case  of  his  willful  failure  properly  to  follow  such  course  or  so  to  enlist, 
payment  of  compensation  shall  be  suspended  until  such  willful  failure  ceases 
and  no  compensation  shall  be  payable  for  the  intervening  period. 

Sec.  305.  That  upon  its  own  motion  or  upon  application  the  bureau  may 
at  any  time  review  an  award,  and,  in  accordance  with  the  facts  found  upon 
such  review,  may  end,  diminish,  or  increase  the  compensation  previously 
awarded,  or,  if  compensation  has  been  refused  or  discontinued,  may  award 
compensation. 

Sec.  306.  That  no  compensation  shall  be  payable  for  death  or  disability 
which  does  not  occur  prior  to  or  within  one  year  after  discharge  or  resig- 
nation from  the  service,  except  that  where,  after  a  medical  examination 
made  pursuant  to  regulations,  at  the  time  of  discharge  or  resignation  from 
the  service,  or  within  such  reasonable  time  thereafter,  not  exceeding  one 
year,  as  may  be  allowed  by  regulations,  a  certificate  has  been  obtained  from 
the  director  to  the  effect  that  the  injured  person  at  the  time  of  his  dis- 


268  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

charge  or  resignation  was  suffering  from  injury  likely  to  result  in  death 
or  disability,  compensation  shall  be  payable  for  death  or  disability,  whenever 
occurring,  proximately  resulting  from  such  injury. 

Sec.  307.  That  compensation  shall  not  be  payable  for  death  in  the  course 
of  the  service  until  the  death  be  officially  recorded  in  the  department  under 
which  he  may  be  serving.  No  compensation  shall  be  payable  for  a  period 
during  which  the  man  has  been  reported  "  missing  "  and  a  family  allowance 
has  been  paid  for  him  under  the  provisions  of  Article  II. 

Sec.  308.  That  no  compensation  shall  be  payable  for  death  inflicted  as  a 
lawful  punishment  for  a  crime  or  military  offense  except  when  inflicted  by 
the  enemy.  A  dismissal  or  dishonorable  or  bad  conduct  discharge  from  the 
service  shall  bar  and  terminate  all  right  to  any  compensation  under  the  pro- 
visions of  this  article. 

Sec.  309.  That  no  compensation  shall  be  payable  unless  a  claim  therefor 
be  filed,  in  case  of  disability,  within  five  years  after  discharge  or  resignation 
from  the  service,  or,  in  case  of  death  during  the  service,  within  five  years 
after  such  death  is  officially  recorded  in  the  department  under  wliich  he  may 
be  serving:  Provided,  however,  That  where  compensation  is  payable  for 
death  or  disability  occurring  after  discharge  or  resignation  from  the  service, 
claim  must  be  made  within  five  years  after  such  death  or  the  beginning  of 
such  disability. 

The  time  herein  provided  may  be  extended  by  the  director  not  to  exceed 
one  year  for  good  cause  shown.  If  at  the  time  that  any  right  accrues  to  any 
person  under  the  provisions  of  this  article,  such  person  is  a  minor,  or  is  of 
unsound  mind  or  physically  unable  to  make  a  claim,  the  time  herein  provided 
shall  not  begin  to  run  until  such  disability  ceases. 

Sec.  310.  That  no  compensation  shall  be  payable  for  any  period  more  than 
two  years  prior  to  the  date  of  claim  therefor,  nor  shall  increased  compensa- 
tion be  awarded  to  revert  back  more  than  one  year  prior  to  the  date  of 
claim  therefor. 

Sec.  311.  That  compensation  under  this  article  shall  not  be  assignable,  and 
shall  be  exempt  from  attachment  and  execution  and  from  all  taxation. 

Sec.  312.  That  compensation  under  this  article  shall  not  be  paid  while  the 
person  is  in  receipt  of  service  or  retirement  pay.  The  laws  providing  for 
gratuities  or  payments  in  the  event  of  death  in  the  service  and  existing  pen- 
sion laws  shall  not  be  applicable  after  the  enactment  of  this  amendment 
to  persons  now  in  or  hereafter  entering  the  military  or  naval  service,  or  to 
their  widows,  children  or  their  dependents,  except  in  so  far  as  rights  under 
any  such  law  shall  have  heretofore  accrued. 

Compensation  because  of  disability  or  death  of  members  of  the  Army 
Nurse  Corps  (female)  or  of  the  Navy  Nurse  Corps  (female)  shall  be  in 
lieu  of  any  compensation  for  such  disability  or  death  under  the  Act  entitled 
"  An  Act  to  provide  compensation  for  employees  of  the  United  States  suf- 
fering injuries  while  in  the  performance  of  their  duties,  and  for  other  pur- 
poses," approved  September  seventh,  nineteen  hundred  and  sixteen. 

Sec.  313.  That  if  an  injury  or  death  for  which  compensation  is  payable 
under  this  amendatory  Act  is  caused  under  circumstances  creating  a  legal 


APPENDIX    C  269 

liability  upon  some  person  other  than  the  United  States  or  the  enemy  to  pay 
damages  therefor,  the  director,  as  a  condition  to  payment  of  compensation 
by  the  United  States,  shall  require  the  beneficiary  to  assign  to  the  United 
States  any  right  of  action  he  may  have  to  enforce  such  liability  of  such  other 
person  or  any  right  which  he  may  have  to  share  in  any  money  or  other 
property  received  in  satisfaction  of  such  liability  of  such  other  person.  The 
cause  of  action  so  assigned  to  the  United  States  may  be  prosecuted  or  com- 
promised by  the  director  and  any  money  realized  thereon  shall  be  placed  to 
the  credit  of  the  compensation  fund. 

Sec.  314.  That  from  and  after  the  passage  of  this  Act  the  rate  of  pension 
for  a  widow  of  an  officer  or  enlisted  man  of  the  Army,  Navy,  or  Marine 
Corps  of  the  United  States  who  served  in  the  Civil  War,  the  War  with 
Spain  or  the  Philippine  Insurrection,  now  on  the  pension  roll  or  hereafter 
to  be  placed  on  the  pension  roll,  and  entitled  to  receive  a  less  rate  than  here- 
inafter provided,  shall  be  $25  per  month;  and  nothing  herein  shall  be  con- 
strued to  affect  the  additional  allowance  provided  by  existing  pension  laws 
on  account  of  a  helpless  child  or  child  unider  sixteen  years  of  age :  Provided, 
however,  That  this  Act  shall  not  be  so  construed  as  to  reduce  any  pension 
under  any  Act,  public  or  private :  And  provided  further.  That  the  provisions 
of  this  section  shall  be  administered,  executed,  and  enforced  by  the  Com- 
missioner of  Pensions. 

Article  IV 

INSURANCE 

Sec.  400.  That  in  order  to  give  to  every  commissioned  officer  and  enlisted 
man  and  to  every  member  of  the  Army  Nurse  Corps  (female)  and  of  the 
Navy  Nurse  Corps  (female)  when  employed  in  active  service  under  the  War 
Department  or  Navy  Department  greater  protection  for  themselves  and  their 
dependents  than  is  provided  in  Article  III,  the  United  States,  upon  applica- 
tion to  the  bureau  and  without  medical  examination,  shall  grant  insurance 
against  the  death  or  total  permanent  disability  of  any  such  person  in  any 
multiple  of  $500,  and  not  less  than  $1000  or  more  than  $10,000,  upon  the  pay- 
ment of  the  premiums  as  hereinafter  provided. 

Sec.  401.  That  such  insurance  must  be  applied  for  within  one  hundred  and 
twenty  days  after  enlistment  or  after  entrance  into  or  employment  in  the 
active  service  and  before  discharge  or  resignation,  except  that  those  persons 
who  are  in  the  active  war  service  at  the  time  of  the  publication  of  the  terms 
and  conditions  of  such  contract  of  insurance  may  apply  at  any  time  within 
one  hundred  and  twenty  days  thereafter  and  while  in  such  service.  Any  per- 
son in  the  active  service  on  or  after  the  sixth  day  of  April,  nineteen  hundred 
and  seventeen,  who,  while  in  such  service  and  before  the  expiration  of  one 
hundred  and  twenty  days  from  and  after  such  publication,  becomes  or  has 
become  totally  and  permanently  disabled  or  dies,  or  has  died,  without  having 
applied  for  insurance,  shall  be  deemed  to  have  applied  for  and  to  have  been 
granted  insurance,  payable  to  such  person  during  his  life  in  monthly  install- 


'2.'JO  EFFECTS    OF    THE    WAR    UPON    INSURANCE 

ments  of  $25  each.  If  he  shall  die  either  before  he  shall  have  received  any 
of  such  monthly  installments  or  before  he  shall  have  received  two  hundred 
and  forty  of  such  monthly  installments,  then  $25  per  month  shall  be  paid  to 
his  wife  from  the  time  of  his  death  and  during  her  widowhood,  or  to  his 
child,  or  widowed  mother  if  and  while  they  survive  him :  Provided,  however. 
That  not  more  than  two  hundred  and  forty  of  such  monthly  installments, 
including  those  received  by  such  person  during  his  total  and  permanent  disa- 
bility, shall  be  so  paid;  and  in  that  event  the  amount  of  the  monthly  install- 
ments shall  be  apportioned  between  them  as  may  be  provided  by  regulations. 

Sec.  402.  That  the  director,  subject  to  the  general  direction  of  the  Secre- 
tary of  the  Treasury,  shall  promptly  determine  upon  and  publish  the  full 
and  exact  terms  and  conditions  of  such  contract  of  insurance.  The  insur- 
ance shall  not  be  assignable,  and  shall  not  be  subject  to  the  claims  of 
creditors  of  the  insured  or  of  the  beneficiary.  It  shall  be  payable  only  to  a 
spouse,  child,  grandchild,  parent,  brother  or  sister,  and  also  during  total  and 
permanent  disability  to  the  injured  person,  or  to  any  or  all  of  them.  The 
insurance  shall  be  payable  in  two  hundred  and  forty  equal  monthly  install- 
ments. Provisions  for  maturity  at  certain  ages,  for  continuous  installments 
during  the  life  of  the  insured  or  beneficiaries,  or  both,  for  cash,  loan,  paid-up 
and  extended  values,  dividends  from  gains  and  savings,  and  such  other  pro- 
visions for  the  protection  and  advantage  of  and  for  alternative  benefits  to 
the  insured  and  the  beneficiaries  as  may  be  found  to  be  reasonable  and  prac- 
ticable, may  be  provided  for  in  the  contract  of  insurance,  or  from  time  to 
time  by  regulations.  All  calculations  shall  be  based  upon  the  American  Expe- 
rience Table  of  Mortality  and  interest  at  three  and  one-half  per  centum  per 
annum,  except  that  no  deduction  shall  be  made  for  continuous  installments 
during  the  life  of  the  insured  in  case  his  total  and  permanent  disability  con- 
tinues more  than  two  hundred  and  forty  months.  Subject  to  regulations,  the 
insured  shall  at  all  times  have  the  right  to  change  the  beneficiary  or  bene- 
ficiaries of  such  insurance  without  the  consent  of  such  beneficiary  or  benefi- 
ciaries, but  only  within  the  classes  herein  provided.  If  no  beneficiary  within 
the  permitted  class  be  designated  by  the  insured,  either  in  his  lifetime  or  by 
his  last  will  and  testament,  or  if  the  designated  beneficiary  does  not  survive 
the  insured,  the  insurance  shall  be  payable  to  such  person  or  persons,  within 
the  permitted  class  of  beneficiaries  as  would  under  the  laws  of  the  State  of 
the  residence  of  the  insured,  be  entitled  to  his  personal  property  in  case  of 
intestacy.  If  no  such  person  survive  the  insured,  then  there  shall  be  paid 
to  the  estate  of  the  insured  an  amount  equal  to  the  reserve  value,  if  any, 
of  the  insurance  at  the  time  of  his  death,  calculated  on  the  basis  of  the 
American  Experience  Table  of  Mortality  and  three  and  one-half  per  centum 
interest  in  full  of  all  obligations  under  the  contract  of  insurance. 

Sec.  403.  That  the  United  States  shall  bear  the  expenses  of  administra- 
tion and  the  excess  mortality  and  disability  cost  resulting  from  the  hazards 
of  war.  The  premium  rates  shall  be  the  net  rates  based  upon  the  American 
Experience  Table  of  Mortality  and  interest  at  three  and  one-half  per  centum 
per  annum. 

Sec.  404.    That  during  the  period  of  war  and  thereafter  until  converted 


APPENDIX    C  271 

the  insurance  shall  be  term  insurance  for  successive  terms  of  one  year  each. 
Not  later  than  five  years  after  the  date  of  the  termination  of  the  war  as 
declared  by  proclamation  of  the  President  of  the  United  States,  the  term 
insurance  shall  be  converted,  without  medical  examination,  into  such  form 
or  forms  of  insurance  as  may  be  prescribed  by  regulations  and  as  the  insured 
may  request.  Regulations  shall  provide  for  the  right  to  convert  into  ordinary 
life,  twenty  payment  life,  endowment  maturing  at  age  sixty-two  and  into 
other  usual  forms  of  insurance  and  shall  prescribe  the  time  and  method  of 
payment  of  the  premiums  thereon,  but  payments  of  premiums  in  advance 
shall  not  be  required  for  periods  of  more  than  one  month  each  and  may  be 
deducted  from  the  pay  or  deposit  of  the  insured  or  be  otherwise  made  at 
his  election. 

Sec.  405.  That  in  the  event  of  disagreement  as  to  a  claim  under  the  con- 
tract of  insurance  between  the  bureau  and  any  beneficiary  or  beneficiaries 
thereunder,  an  action  on  the  claim  may  be  brought  against  the  United  States 
in  the  district  court  of  the  United  States  in  and  for  the  district  in  which 
such  beneficiaries  or  any  one  of  them  resides*  The  court,  as  part  of  its 
judgment,  shall  determine  and  allow  such  reasonable  attorney's  fees,  not  to 
exceed  ten  per  centum  of  the  amount  recovered,  to  be  paid  by  the  claimant 
on  behalf  of  whom  such  proceedings  are  instituted  to  his  attorney;  and  it 
shall  be  unlawful  for  the  attorney  or  for  any  other  person  acting  as  claim 
agent  or  otherwise  to  ask  for,  contract  for,  or  receive  any  other  compensa- 
tion because  of  such  action.  No  other  compensation  or  fee  shall  be  charged 
or  received  by  any  person  except  such  as  may  be  authorized  by  the  commis- 
sioner in  regulations  to  be  promulgated  by  him.  Any  person  violating  the 
provisions  of  this  section  shall  be  deemed  guilty  of  a  misdemeanor,  and 
upon  conviction  thereof  shall,  for  each  and  every  such  offense,  be  fined  not 
exceeding  $500,  or  be  imprisoned  at  hard  labor  not  exceeding  two  years,  or 
both,  in  the  discretion  of  the  court. 

Sec.  3.  That  section  eight  of  the  Act  entitled  "  An  Act  to  authorize  the 
President  to  increase  temporarily  the  Military  Establishment  of  the  United 
States,"  approved  May  eighteenth,  nineteen  hundred  and  seventeen,  shall  be 
held  and  construed  to  authorize  the  President,  in  accordance  with  the  pro- 
visions of  said  Act  and  for  the  period  of  the  existing  emergency  only,  to 
appoint  as  generals  the  Chief  of  Staff  and  the  commander  of  the  United 
States  forces  in  France ;  and  as  lieutenant  general  each  commander  of  an 
army  or  army  corps  organized  as  authorized  by  existing  law :  Provided,  That 
the  pay  of  the  grades  of  general  and  lieutenant  general  shall  be  $10,000  and 
$9000  a  year,  respectively,  with  allowances  appropriate  to  said  grades  as 
determined  by  the  Secretary  of  War:  And  provided,  That  brigadier  gen- 
erals of  the  Army  shall  hereafter  rank  relatively  with  rear  admirals  of  the 
lower  half  of  the  grade.  And,  hereafter,  the  chief  of  any  existing  staff  corps, 
department,  or  bureau,  except  as  is  otherwise  provided  for  the  Chief  of  Staff, 
shall  have  the  rank,  pay,  and  allowances  of  major  general. 

Approved,  October  6,  191 7. 


APPENDIX  D 

Application  for  Vessel  Insurance  (Time) 

THE  UNITED  STATES  OF  AMERICA 

Treasury  Department 

Bureau  of  War  Risk  Insurance 

Washington,  D.  C. 

INSURANCE    IS    LIMITED    TO    AMERICAN    VESSELS    AGAINST 
THE  RISKS  OF  WAR  ONLY 

THIS  APPLICATION  IS  FOR  WAR  RISK  INSURANCE  COVERING 
COASTWISE  TRADE  BETWEEN  PORTS  OF  THE  UNITED 
STATES  ONLY,  AND  FOR  A  PERIOD  OF  THIRTY  DAYS 

Owner 

VESSEL  VALUATION  SUM    INSURED  RATE  PREMIUM 


At  and  from  noon   (Washington  time) 
to  noon   (Washington  time)    


Application  is  made  for  insurance  against  war  risks  on  the  form  of  policy 
issued  by  the  Bureau  of  War  Risk  Insurance,  the  following  special  condi- 
tions being  imposed,  which  may  not  be  changed  except  under  signature  of 
the  Director  of  the  Bureau  ®f  War  Risk  Insurance: 

A.  The  valuation  of  the  vessel  shall  be  as  agreed  with  the  Bureau. 

B.  If  any  marine  insurance  is  in  force,  particulars  of  one  policy  shall  be 
filled  in  on  the  back  of  this  application. 

C.  Quotations  made  are  subject  to  acceptance  and  filing  of  application  and 
certified  check  (made  payable  to  Treasurer  of  the  United  States)  within 
forty-eight  hours. 

D.  Warranted  that  the  vessel  will  sail  within  fifteen  days  from  the  date 
of  this  application;  or,  failing  sailing  within  fifteen  days,  that  if  an  addi- 
tional premium  is  required  by  the  Bureau  based  on  its  then  current  rates, 
it  will  be  paid. 

E.  The  policy  of  the  Bureau  contains  the  following  clauses : 

Warranted  that  the  vessel  shall  not  start  on  a  voyage  if 
ordered  not  to  do  so  by  the  United  States  of  America,  and  free 
from  claim  for  loss,  damage,  or  expense  consequent  upon  obey- 
ing such  orders. 

273 


APPENDIX    D 


273 


Warranted  that  the  vessel  shall  comply,  so  far  as  possible,  with 
the  orders  of  the  United  States  of  America  as  to  routes,  ports 
of  call,  and  stoppages. 

It  is  necessary  that  the  vessel  owners  should  apply  for  orders  to  the  Com- 
mandant of  the  Naval  District  of  the  port  from  which  the  vessel  is  to  sail. 

A  list  of  the  Naval  Districts  of  the  United  States  and  the  addresses  of  the 
Commandants  of  those  districts  will  be  found  on  the  back  of  this  application. 


F.   Warranted  confined  to. 


Expected  date  of  sailing. 


Applicant. 


Dated ,  191 


Application  for  Cargo  Insurance 

From  Collector  of  Customs  at. 


THE  UNITED  STATES  OF  AMERICA 

Treasury  Department 

Bureau  of  War  Risk  Insurance 

Washington,  D.  C. 

Insurance  is  limited  to  cargoes  on  American  vessels  against  the  risks  of 
war  only  and  may  only  be  effected  when  the  marine  risks  of  the  said  cargo 
are  insured  by  approved  insurance  companies  or  underwriters. 


Insurance  is  wanted  by 


For  account  of 


Description  of 
Merchandise 

(Include   marks 
and  numbers) 


Marine  Insur- 
ance Carried 

Company         Amount 


Per  vessel         of  line  or  owner. 


Merchandise 

Valued  at       Amt.  insured 


Rate 


Premium 


At  and  from 


to 


274  EFFECTS   OF   THE   WAR   UPON   INSURANCE 

Application  is  made  for  insurance  against  war  risks  on  the  form  of  policy 
issued  by  the  Bureau  of  War  Risk  Insurance,  the  following  special  condi- 
ditions  being  imposed,  which  conditions  may  not  be  changed  except  under 
signature  of  the  Director  of  the  Bureau  of  War  Risk  Insurance : 

A.  Quotations  made  are  subject  to  acceptance  and  filing  of  application 
and  certified  check  (made  payable  to  Treasurer  of  the  United  States)  within 
forty-eight  hours. 

B.  Warranted  that  the  vessel  will  sail  within  fifteen  days  from  the  date 
of  this  application ;  or,  failing  sailing  within  fifteen  days,  that  if  an  addi- 
tional premium  is  required  by  the  Bureau  based  on  its  then  current  rates, 
it  will  be  paid. 

C.  The  amount  insured  against  war  risks  can  not  under  any  circumstances 
exceed  the  amount  insured  against  marine  risks.  If  the  applicant  is  unable 
to  state  definitely  the  amount  to  be  insured  he  shall  declare  a  provisional 
amount,  which  may  not  be  increased,  but  which  may  be  reduced  upon 
receipt  of  definite  advice,  to  an  amount  not  less  than  the  total  amount 
insured  under  marine  policies.  Premium  shall  be  paid  on  this«-provisional 
amount,  and  if  the  amount  is  reduced  when  final  particulars  are  known  the 
excess  of  such  premium  will  be  returned  to  the  assured  by  the  Treasury 
Department  of  the  United  States  Government. 

D.  Warranted  free  from  claim  for  loss,  damage,  or  expense  consequent 
upon  any  prohibition  of  importation  (existing  at  the  time  of  loading)  of 
the  country  to  which  the  goods  or  merchandise  herein  are  insured. 

Expected  date  of  sailing 

Applicant. 
Dated ...,  191 


Application  for  Freight  Insurance 

THE  UNITED  STATES  OF  AMERICA 

Treasury  Department 

Bureau  of  War  Risk  Insurance 

Washington,  D.  C. 

INSURANCE  IS  LIMITED  TO  FREIGHT  OF  AMERICAN  VESSELS 
AGAINST  THE  RISKS  OF  WAR  ONLY 

RATES  WILL  BE  QUOTED  FOR  A  VOYAGE  ONLY 
Owner 

VESSEL  SUM   INSURED  RATE  PREMIUM 

Voyage,  at  and  from 

to    


APPENDIX   D  275 

Application  is  made  for  insurance  against  war  risks  on  the  form  of  policy 
issued  by  the  Bureau  of  War  Risk  Insurance,  the  following  special  condi- 
ditions  being  imposed,  which  may  not  be  changed  except  under  signature  of 
the  Director  of  the  Bureau  of  War  Risk  Insurance: 

A.  The  insurance  shall  not  exceed  the  amount  of  the  steamer's  freight 
collectible  at  destination,  plus  advances  by  the  insured  which  are  collectible 
at  destination  from  consignees  or  owners  of  the  goods. 

B.  Quotations  made  are  subject  to  acceptance  and  filing  application  and 
certified  check  (made  payable  to  Treasurer  of  the  United  States)  within 
forty-eight  hours. 

C.  Warranted  that  the  vessel  will  sail  within  fifteen  days  from  the  date 
of  this  application;  or,  failing  sailing  within  fifteen  days,  that  if  an  addi- 
tional premium  is  required  by  the  Bureau  based  on  its  then  current  rates, 
it  will  be  paid. 

D.  Warranted  free  from  claim  for  loss,  damage,  or  expense  consequent 
upon  any  prohibition  "Of  importation  (existing  at  the  time  of  loading)  of 
the  country  to  which  the  goods  or  merchandise  herein  are  insured. 

Expected  date  of  sailing 

Applicant. 
Dated ,  191 


Application  Crew,  Form  15 

Sheet  i,  No.  5  A 

THE  UNITED  STATES  OF  AMERICA 

Treasury  Department 

Bureau  of  War  Risk  Insurance 

Washington,  D.  C. 

1.  Application  is  made  for  insurance  on  the  Bureau's  form  of  policy  of 

the  master,  officers,  and  crew  of  the  American  S 

called  the ,  during  a  voyage  at  and 

from    

to , 

sailing  about. ,  191  ,  against  loss  of  life  and 

personal  injury  by  the  risks  of  war  and  for  compensation  if  detained  by  an 
enemy  of  the  United  States. 

2.  On  the  following  pages  is  a  certified  statement  showing  the  names, 
nationality,  and  addresses  of  the  master,  officers,  and  crew,  and  setting  forth 
the  position  occupied  by  each,  the  wages  (including  bonus)  paid  each  man 
per  month,  and  the  amount  of  insurance  wanted  for  each  man  in  accord- 


276  EFFECTS    OF   THE   WAR   UPON    INSURANCE 

ance  with  the  act  of   Congress  approved   September  2,    1914,   as   amended 
June  12,  1917. 

3.  The  total  amount  of  insurance  required  is 

dollars  ($ ),  which  at  a 

premium  of per  cent    (        %) 

equals dollars   ($ ),  for 

which  a  certified  check  to  the  order  of  the  Treasurer  of  the  United  States 
is  inclosed. 

4.  Attached  hereto  are orders  for  payment  of  compensa- 
tion in  event  of  detention  by  an  enemy  of  the  United  States  following 
capture. 

5.  In  the  event  of  a  deviation  or  change  of  voyage  an  additional  premium 
shall  be  paid  if  required  by  the  Bureau. 

,  Applicant. 

Dated ,  1917.  *" 


Form  16  No.  6  A 

Policy  No.  S.  I, 

THE  UNITED  STATES  OF  AMERICA 

Treasury  Department 

Bureau  of  War  Risk  Insurance 

Washington,  D.  C. 

Does  hereby  insure  

for  account  of  the  master,  officers,  and  crew  of  the  American  Vessel  called 

the , 

during  a  voyage  at  and  from  

to   ,  sailing 

about   ,   during  their  employment  on   or 

by  said  vessel  for  the  period  of  the  aforesaid  voyage,  beginning,  in  respect 
to  each  person  insured,  from  the  time  such  person  signs  the  articles  for  the 
aforesaid  voyage,  or,  if  already  on  articles  for  a  series  of  voyages  or  period 
of  time,  from  the  inception  of  the  aforesaid  voyage  (i.  e.,  when  the  vessel  is 
ready  to  begin  the  loading  of  cargo  for  the  aforesaid  voyage  or  to  sail  in 
ballast)  and  continuing  until  such  person  is  discharged  or  the  termination  of 
the  aforesaid  voyage  (i.  e.,  when  the  vessel  is  ready  to  begin  the  loading  of 
cargo  for  another  voyage  or  to  sail  in  ballast),  whichever  may  first  occur 
for dollars. 

In  case  of  claim,  to  be  paid  in  funds  current  in  the  United  States. 

Against  loss  of  life  and  personal  injury  to  the  master,  officers,  and  crew 
by  the  risks  of  war,  but  only  to  the  extent  specified  in  the  following 
schedules : 


APPENDIX   D  2,TJ 

SCHEDULE  ONE. 

Master $ 

Chief  Officer 

Chief  Engineer 


Members  of  crew  at  $1500  each,  or — 


Total  sum  insured $ 

and  this  policy  is   issued  in  consideration  of  the   payment  of  a  premium 

of  dollars, 

being per  cent  of  the  total  of  the  sums  hereby  insured. 

The  amount  for  which  each  person  is  insured,  according  to  this  schedule, 
is  hereafter  referred  to  as  the  principal  sum. 


No.  5,  Vessel  •  No. 

THE  UNITED  STATES  OF  AMERICA 

Treasury  Department 

Bureau  of  iVar  Risk  Insurance 

Washington,  D.  C. 

on  account  of  whom 

it  may  concern. 

Do       make  insurance  and  cause  to 
be  insured  at  and  from  noon  Washington 
time  to  noon  Washington  time 
Sum  Insured 
Dollars. 


278  EFFECTS    OF   THE   WAR    UPON    INSURANCE 

In  case  of  loss,  to  be  paid  in   funds  current  in  the 
United  States  of  America. 

Upon  the  Hull,  Machinery,  Boilers,  Equipment,  Stores  and 
everything   connected   therewith    of    and    in    the    American 

Vessel  called  the or   by 

whatsoever  other  name  or  names  the  said  vessel  is  or  shall 
be  named  or  called,  beginning  the  adventure  upon  the  said 
vessel,  etc.,  as  above,  and  shall  so  continue  and  endure 
during  the  period  as  aforesaid.  If  on  a  passage  at  the  expi- 
ration of  the  term,  the  risk  to  continue  at  pro  rata  premium 
until  the  arrival  of  the  vessel  at  a  safe  port,  and  her  being 
moored  therein  twenty-four  hours  in  good  safety,  but  war- 
ranted notice  be  given  the  Bureau  of  War  Risk  Insurance 
as  soon  as  known  to  the  insured  and  the  additional  premium 
required  by  the  Bureau  paid.  And  it  shall  be  lawful  for  the 
said  vessel,  etc.,  to  proceed  and  sail  to  and  toi^ch  and  stay 
at  any  ports  or  places  whatsoever  and  wheresoever,  except- 
ing as  hereinafter  provided  without  prejudice  to  this  insur- 
ance. The  said  vessel,  etc.,  for  so  much  as  concerns  the 
insured,  by  agreement  between  the  insured  and  insurer  in 
this  Policy,  are  and  shall  be  valued  at  $ 

Touching  the  adventures  and  perils  which  the  insurer  is 
content  to  bear  and  does  take  upon  itself,  they  are  of  men- 
of-war,  letters  of  marque  and  countermarque,  surprisals, 
takings  at  sea,  arrests,  restraints  and  detainments  of  all 
kings,  princes  and  people  of  what  nation,  condition,  or 
quality  soever,  except  of  the  United  States  of  America  and 
of  the  nations  engaged  in  war  with  the  enemies  of  the 
United  States  of  America,  and  all  consequences  of  hostilities 
or  war-like  operations  except  of  the  United  States  of 
America,  and  of  the  nations  engaged  in  war  with  the  enemies 
of  the  United  States  of  America,  whether  before  or  after 
the  declaration  of  war,  and  of  mines. 

And  in  case  of  any  loss  or  misfortune,  it  shall  be  lawful 
to  the  insured,  their  factors,  servants  and  assigns,  to  sue, 
labor  and  travel  for,  in  and  about  the  defense,  safeguard 
and  recovery  of  the  said  vessel,  etc.,  or  any  part  thereof, 
without  prejudice  to  this  insurance,  to  the  charges  whereof 
the  insurer  will  contribute  according  to  the  rate  and  quantity 
of  the  sum  herein  insured.  And  it  is  especially  declared  and 
agreed  that  no  acts  of  the  insurer  or  insured  in  recovering, 
saving,  or  preserving  the  property  insured,  shall  be  consid- 
ered as  a  waiver  or  acceptance  of  abandonment;  having  been 
Premium  P^*^  the  consideration  for  this  insurance,  by  the  insured 
or assigns,  at  and  after  the  rate  of per  cent. 

In  case  of  an  iron  or  steel  vessel  average  payable  without 
deduction  of  new  for  old. 


APPENDIX    D  279 

Warranted  free  from  any  claim  for  interest  or  damage  by 
deterioration  due  to  delay. 

Warranted  no  ownership  by  enemies  or  their  allies  and  no 
trading  with  enemies  or  their  allies  or  with  the  country  of 
or  occupied  by  enemies  or  their  allies  during  the  period  of 
this  insurance. 

Warranted  that  the  vessel  shall  not  start  on  a  voyage  if 
ordered  not  to  do  so  by  the  United  States  of  America,  and 
free  from  claim  for  loss,  damage,  or  expense  consequent 
upon  obeying  such  orders. 

Warranted  that  the  vessel  shall  comply,  so  far  as  possible, 
with  the  orders  of  the  United  States  of  America  as  to 
routes,  ports  of  call,  and  stoppages. 

Warranted  that  if  in  an  enemy  port,  the  vessel  shall  leave 
within  the  days  of  grace  allowed  by  the  enemy  and  shall 
comply  with  the  terms  of  any  pass  granted  by  the  enemy. 

Warranted  by  the  assured  that  the  vessel  insured  here- 
under shall  not  enter  or  leave,  or  attempt  to  tnter  or  leave, 
any  port  which  is  known  to  be  blockaded  by  the  Powers  at 
War. 

Warranted  not  to  abandon  in  case  of  blockade  and  free 
from  loss  arising  from  any  attempt  to  evade  blockade,  but  in 
the  event  of  blockade,  to  be  at  liberty  to  proceed  to  an  open 
port  and  there  end  the  voyage. 

In  the  event  of  loss  and  claim,  prompt  notice  should  be 
given  the  Bureau  of  War  Risk  Insurance.  Claims  will  be 
paid  within  thirty  days  after  complete  proofs  of  interest  and 
loss  have  been  filed  with  the  Bureau. 

This  insurance  is  subject  to  the  warranties  and  conditions 
of  the  application. 

IN  WITNESS  WHEREOF,  The  United  States  of  America 
has  caused  this  policy  to  be  signed  by  its  Secretary  of  the 
Treasury,  but  it  shall  not  be  valid  until  countersigned  by 
William  C.  De  Lanoy,  Director  of  the  Bureau  of  War 
Risk  Insurance. 

W.  G.  McAdoo, 
Secretary. 

Countersigned  at  Washington,  D.  C,  this day  of ,  191 


Director. 


28o 


EFFECTS  ,0F   THE   WAR   UPON    INSURANCE 


No.  6,  Voyage 


No.  262 


Sum  Insured 


THE  UNITED  STATES  OF  AMERICA 

Treasury  Department 

Bureau  of  War  Risk  Insurance 

Washington,  D.  C. 

—on  account  of  whom 

it  may  concern. 

Do        make  insurance  and  cause 


be  insured  at  and  from 


to 


Dollars. 


In  case  of  loss,  to  be  paid  in  funds  current  in  the 
United  States  of  America.  •■ 


Premium 


Upon  the  Hull,  Machinery,  Boilers,  Equipment,  Stores  and 
everything   connected   therewith   of    and    in   the    American 

Vessel  called  the or  by 

whatsoever  other  name  or  names  the  said  vessel  is  or  shall 
be  named  or  called,  beginning  the  adventure  on  the  said 
vessel,  etc.,  as  above,  and  shall  so  continue  and  endure 
until  the  said  vessel,  etc.,  shall  be  arrived  at  as  above  and 
the  goods  and  merchandise  on  board  be  there  discharged  and 
safely  landed  or  if  in  ballast  until  she  be  arrived  at  as  above 
and  until  she  has  moored  and  anchored  twenty-four  hours 
in  good  safety.  The  said  vessel,  etc.,  for  so  much  as  con- 
cerns the  insured,  by  agreement  between  the  insured  and  in- 
surer in  this  Policy,  are  and  shall  be  valued  at  $ 

Touching  the  adventures  and  perils  which  the  insurer  is 
content  to  bear  and  does  take  upon  itself,  they  are  of  men- 
of-war,  letters  of  marque  and  countermarque,  surprisals, 
takings  at  sea,  arrests,  restraints  and  detainments  of  all 
kings,  princes,  and  people  of  what  nation,  condition,  or 
quality  soever,  except  of  the  United  States  of  America  and 
of  the  nations  engaged  in  war  with  the  enemies  of  the 
United  States  of  America,  and  all  consequences  of  hostilities 
or  war-like  operations  except  of  the  United  States  of 
America,  and  of  the  nations  engaged  in  war  with  the  enemies 
of  the  United  States-  of  America,  whether  before  or  after 
the  declaration  of  war,  and  of  mines. 

And  in  case  of  any  loss  or  misfortune,  it  shall  be  lawful 

_to  the  insured,  their  factors,  servants  and  assigns,  to  sue, 

labor  and  travel  for,  in  and  about  the  defense,  safeguard, 

and  recovery  of  the  said  vessel,  etc.,  or  any  part  thereof, 


APPENDIX    D  281 

without  prejudice  to  this  insurance,  to  the  charges  whereof 
the  insurer  will  contribute  according  to  the  rate  and  quantity 
of  the  sum  herein  insured.  And  it  is  especially  declared  and 
agreed  that  no  acts  of  the  insurer  or  insured  in  recovering, 
saving,  or  preserving  the  property  insured,  shall  be  consid- 
ered as  a  waiver  or  acceptance  of  abandonment ;  having  been 
paid  the  consideration  for  this  insurance,  by  the  insured 
or assigns,  at  and  after  the  rate  of per  cent. 

In  the  case  of  an  iron  or  steel  vessel  average  payable  with- 
out deduction  of  new  for  old. 

Warranted  free  from  any  claim  for  interest  or  damage  by 
deterioration  due  to  delay. 

Warranted  no  ownership  by  enemies  or  their  allies  and  no 
trading  with  enemies  or  their  allies  or  with  the  country  of 
or  occupied  by  enemies  or  their  allies  during  the  period  of 
this  insurance. 

Warranted  that  the  vessel  shall  not  start  on  a  voyage  if 
ordered  not  to  do  so  by  the  United  States  of  America,  and 
free  from  claim  for  loss,  damage,  or  expense  consequent 
upon  obeying  such  orders. 

Warranted  that  the  vessel  shall  comply,  so  far  as  possible, 
with  the  orders  of  the  United  States  of  America  as  to 
routes,  ports  of  call,  and  stoppages. 

Warranted  that  if  in  an  enemy  port,  the  vessel  shall  leave 
within  the  days  of  grace  allowed  by  the  enemy  and  shall 
comply  with  the  terms  of  any  pass  granted  by  the  enemy. 

Warranted  that  the  vessel  insured  hereunder  shall  not 
enter  or  leave,  or  attempt  to  enter  or  leave,  any  port  which 
is  known  to  be  blockaded  by  the  Powers  at  War. 

Warranted  not  to  abandon  in  case  of  blockade  and  free 
from  loss  arising  from  an  attempt  to  evade  blockade,  but  in 
the  event  of  blockade,  to  be  at  liberty  to  proceed  to  an  open 
port  and  there  end  the  voyage. 

It  is  agreed  that  this  insurance  shall  not  be  vitiated  by  a 
deviation  from  the  voyage  provided  the  same  be  communi- 
cated to  the  Bureau  of  War  Risk  Insurance  as  soon  as 
known  to  the  insured  and  an  additional  premium  paid  if 
required. 

In  the  event  of  loss  and  claim,  prompt  notice  should  be 
given  the  Bureau  of  War  Risk  Insurance.  Claims  will  be 
paid  within  thirty  days  after  complete  proofs  of  interest  and 
and  loss  have  been  filed  with  the  Bureau. 

This  insurance  is  subject  to  the  warranties  and  conditions 
of  the  application. 

IN  WITNESS  WHEREOF,  The  United  States  of  America 
has  caused  this  policy  to  be  signed  by  its  Secretary  of  the 
Treasury,  but  it  shall  not  be  valid  until  countersigned  by 


282  EFFECTS    OF   THE   WAR    UPON    INSURANCE 

William   C.   De   Lanoy,   Director  of   the   Bureau   of   War 
Risk  Insurance. 

W.  G,  McAdoo, 
Secretary. 


Countersigned  at  Washington,  D.  C,  this- 


-day  of- 


-,  191 


Cargo 


Sum  Insured 


Director. 


No. 


THE  UNITED  STATES  OF  AMERICA 

Treasury  Department 

Bureau  of  War  Risk  Insurance 

Washington,  D.  C. 


It  may  concern. 

Do        make  insurance  and  cause 
be  insured  at  and  from 


-on  account  of  whom 


to 


Dollars. 


In  case  of  loss,  to  be  paid  in   funds  current  in  the 
United  States  of  America. 


Upon  

per  the  American  Vessel  called  the 

or  by  whatsoever  other  name  or  names  the  said  vessel  is 
or  shall  be  named  or  called,  beginning  the  adventure  upon 
the  said  goods  and  merchandise  from  the  loading  thereof 
on  board  the  said  vessel  as  above,  and  shall  so  continue  and 
endure  during  her  abode  there  and  until  the  vessel  with  her 
goods  and  merchandise  shall  be  arrived  at  as  above  and  be 
there  discharged  and  safely  landed.  The  said  cargo,  for  so 
much  as  concerns  the  insured,  by  agreement  between  the 
insured   and   the   insurer   in   this    Policy,    is    and    shall    be 

valued  at  $ 

Touching  the  adventures  and  perils  which  the  insurer  is 
content  to  bear  and  does  take  upon  itself,  they  are  of  men- 
of-war,  letters  of  marque  and  countermarque,  surprisals, 
takings  at  sea,  arrests,  restraints  and  detainments  of  all 
kings,  princes,  and  people  of  what  nation,  condition,  or 
quality  soever,  except  of  the  United  States  of  America  and 
of  the  nations  engaged  in  war  with  the  enemies  of  the 
United  States  of  America,  and  all  consequences  of  hostilities 
or    war-like    operations    except    of    the    United    States    of 


APPENDIX    D  283 

America,  and  of  the  nations  engaged  in  war  with  the  enemies 
of  the  United  States  of  America,  whether  before  or  after 
the  declaration  of  war,  and  of  mines. 
Premium  -^nd  in  case  of  any  loss  or  misfortune,  it  shall  be  lawful  to 

the  insured,  their  factors,  servants,  and  assigns,  to  sue,  labor 

and  travel  for,  in  and  about  the  defense,  safeguard,  and  re- 
covery of  the  said  goods  and  merchandise,  or  any  part  there- 
of, without  prejudice  to  this  insurance,  to  the  charges  where- 
of the  insurer  will  contribute  according  to  the  rate  and  quan- 
tity of  the  sum  herein  insured.  And  it  is  especially  declared 
and  agreed  that  no  acts  of  the  insurer  or  insured  in  recover- 
ing, saving,  or  preserving  the  property  insured,  shall  be  con- 
sidered as  a  waiver  or  acceptance  of  abandonment;  having 
been  paid  the  consideration  for  this  insurance,  by  the  insured 
or assigns,  at  and  after  the  rate  of per  cent. 

Warranted  free  from  any  claim  for  interest,  loss  of 
market,  or  damage  by  deterioration  due  to  delay. 

Warranted  no  ownership  by  enemies  or  their  allies  and  no 
trading  with  enemies  or  their  allies  or  with  the  country  of 
or  occupied  by  enemies  or  their  allies  during  the  period  of 
this  insurance. 

Warranted  not  to  abandon  in  case  of  blockade  and  free 
from  loss  arising  from  an  attempt  to  evade  blockade,  but  in 
the  event  of  blockade,  to  be  at  liberty  to  proceed  to  an  open 
port  and  there  end  the  voyage. 

It  is  agreed  that  this  insurance  shall  not  be  vitiated  by  a 
deviation  from  the  voyage  provided  the  same  be  communi- 
cated to  the  Bureau  of  War  Risk  Insurance  as  soon  as 
known  to  the  insured  and  an  additional  premium  paid  if 
required. 

In  the  event  of  loss  and  claim,  prompt  notice  should  be 
given  the  Bureau  of  War  Risk  Insurance.  Claims  will  be 
paid  within  thirty  days  after  complete  proofs  of  interest  and 
loss  have  been  filed  with  the  Bureau. 

This  insurance  is  subject  to  the  warranties  and  conditions 
of  the  application. 

IN  WITNESS  WHEREOF,  The  United  States  of  America 
has  caused  this  policy  to  be  signed  by  its  Secretary  of  the 
Treasury,  but  it  shall  not  be  valid  until  countersigned  by 
William  C.  De  Lanoy,  Director  of  the  Bureau  of  War 
Risk  Insurance. 

W.  G.  McAdoo, 
Secretary. 
Countersigned  at  Washington,  D.  C,  this day  of ,  191 

Director. 


284 


EFFECTS   OF   THE   WAR   UPON   INSURANCE 


No.  8,  Freight 


Sum  Insured 


No. 


THE  UNITED  STATES  OF  AMERICA 

Treasury  Department 

Bureau  of  War  Risk  Insurance 

Washington,  D.  C. 


it  may  concern. 

Do        make  insurance  and  cause 
be  insured  at  and  from 


-on  account  of  whom 


to 


Dollars. 


In  case  of  loss,  to  be  paid  in  funds  current  in  the 
United  States  of  America. 

Upon   the    Freight   of    the    American    Vessel    called    the 


Premium 


or  by  whatsoever  other  name  or  names  the  said  vessel  is 
or  shall  be  named  or  called,  beginning  the  adventure  upon 
the  said  freight  from  the  loading  of  the  goods  and  mer- 
chandise on  board  the  said  vessel  as  above,  and  shall  so 
continue  and  endure  during  her  abode  there  and  until  the 
vessel  with  her  goods  and  merchandise  shall  be  arrived  at 
as  above  and  be  there  discharged  and  safely  landed,  but  no 
risk  to  attach  on  shore. 

Touching  the  adventures  and  perils  which  the  insurer  is 
content  to  bear  and  does  take  upon  itself,  they  are  of  men- 
of-war,  letters  of  marque  and  countermarque,  surprisals, 
takings  at  sea,  arrests,  restraints  and  detainments  of  all 
kings,  princes,  and  people  of  what  nation,  condition,  or 
quality  soever,  except  of  the  United  States  of  America  and 
of  the  nations  engaged  in  war  with  the  enemies  of  the 
United  States  of  America,  and  all  consequences  of  hostilities 
or  war-like  operations  except  of  the  United  States  of 
America,  and  of  the  nations  engaged  in  war  with  the  enemies 
of  the  United  States  of  America,  whether  before  or  after 
the  declaration  of  war,  and  of  mines. 

And  in  case  of  any  loss  or  misfortune,  it  shall  be  lawful 
.  to  the  insured,  their  factors,  servants  and  assigns,  to  sue, 
labor  and  travel  for,  in  and  about  the  defense,  safeguard, 
and  recovery  of  the  said  freight,  or  any  part  thereof, 
without  prejudice  to  this  insurance,  to  the  charges  whereof 
the  insurer  will  contribute  according  to  the  rate  and  quantity 
of  the  sum  herein  insured.  And  it  is  especially  declared  and 
agreed  that  no  acts  of  the  insurer  or  insured  in  recovering, 
saving,  or  preserving  the  property  insured,  shall  be  consid- 
ered as  a  waiver  or  acceptance  of  abandonment ;  having  been 
paid  the  consideration  for  this  insurance,  by  the  insured 
or assigns,  at  and  after  the  rate  of per  cent. 


APPENDIX    D  285 

Warranted  free  from  any  claim  for  interest  or  damage 
due  to  delay. 

Warranted  by  the  insured  free  from  claim  consequent  upon 
loss  of  time  whether  arising  from  a  peril  insured  against 
or  not. 

Warranted  no  ownership  by  enemies  or  their  allies  and  no 
trading  with  enemies  or  their  allies  or  with  the  country  of 
or  occupied  by  enemies  or  their  allies  during  the  period  of 
this  insurance. 

Warranted  that  the  vessel  shall  not  start  on  a  voyage  if 
ordered  not  to  do  so  by  the  United  States  of  America,  and 
free  from  claim  for  loss,  damage,  or  expense  consequent 
upon  obeying  such  orders. 

Warranted  that  the  vessel  shall  comply,  so  far  as  possible, 
with  the  orders  of  the  United  States  of  America  as  to 
routes,  ports  of  call,  and  stoppages. 

Warranted  that  if  in  an  enemy  port,  the  vessel  shall  leave 
within  the  days  of  grace  allowed  by  the  enemy  and  shall 
comply  with  the  terms  of  any  pass  granted  by  the  enemy. 

Warranted  and  agreed  that  the  vessel,  the  freight  of 
which  is  insured  hereunder,  shall  not  enter  or  leave,  or 
attempt  to  enter  or  leave,  any  port  which  is  known  to  be 
blockaded  by  the  Powers  at  War. 

Warranted  not  to  abandon  in  case  of  blockade  and  free 
from  loss  arising  from  any  attempt  to  evade  blockade,  but  in 
the  event  of  blockade,  to  be  at  liberty  to  proceed  to  an  open 
port  and  there  end  the  voyage. 

It  is  agreed  that  this  insurance  shall  not  be  vitiated  by  a 
deviation  from  the  voyage  provided  the  same  be  communi- 
cated to  the  Bureau  of  War  Risk  Insurance  as  soon  as 
known  to  the  insured  and  an  additional  premium  paid  if 
required. 

In  the  event  of  loss  and  claim,  prompt  notice  should  be 
given  the  Bureau  of  War  Risk  Insurance.  Claims  will  be 
paid  within  thirty  days  after  complete  proofs  of  interest  and 
loss  have  been  filed  with  the  Bureau. 

This  insurance  is  subject  to  the  warranties  and  conditions 
of  the  application. 

IN  WITNESS  WHEREOF,  The  United  States  of  America 
has  caused  this  policy  to  be  signed  by  its  Secretary  of  the 
Treasury,  but  it  shall  not  be  valid  until  countersigned  by 
William  C.  De  Lanoy,  Director  of  the  Bureau  of  War 
Risk  Insurance.  W.  G.  McAdoo, 

Secretary. 

Countersigned  at  Washington,  D.  C,  this day  of ,  191 

Director. 


APPENDIX  E 

Forms  of  Policies  Used  in  Great  Britain  in  the  Agreement 
Between  the  Government  and  Insurance  Companies 

Forms  of  Policy  in  Connection  with  the  Insurance 

OF  Hulls 

(Note)  In  order  to  show  how  the  scheme  would  work,  the  following 
forms  are  appended.  The  forms  of  original  Policy  to  be  issued  by  the 
Association  are  inserted  by  way  of  illustration  and  are  not  intended  to  be 
a  form  which  in  all  respects  must  be  rigidly  adhered  to.  Certaia  essential 
elements  which  are  necessary  for  the  protection  of  the  state,  must  appear 
in  all  the  original  policies,  but  in  other  respects  it  is  anticipated  that  each 
Association  will  insert  in  such  poHcies  such  stipulations  as  are  prescribed 
by  its  own  rules. 

Schedule  I 
Standard  Form  of  Policy  to  be  issued  by  the  Association. 

The  Association. 

Be  it  Known  that own  name 

as  well  in own  name,  as  for  and  in  the  name  and 

names  of  all  and  every  other  person  or  persons  to  whom  the  same  doth, 
may  or  shall  appertain  in  part  or  in  all,  doth,  subject  to  the  provisions 
hereinafter  contained  and  referred  to,  make  assurance  and  cause  them  and 
every  one  of  them  to  be  insured  lost  or  not  lost,  for  and  during  the  period 

from to ,  both  days  inclusive,  beginning  and 

ending  with  Greenwich  mean  time.  In  port  and  at  sea,  at  all  times,  in  all 
places  and  on  all  occasions,  services  and  trades  whatsoever  and  wheresoever, 
under  steam,  or  sail,  with  leave  to  sail  with  or  without  pilots,  to  tow  and 
assist  vessels  or  craft  in  all  situations  and  to  be  towed. 

Upon  the  Body,  Tackle,  Apparel,  Ordnance,  Munition,  Artillery,  Boat 
and    other    Furniture,    of    and    in    the    good    Ship    or    vessel    called    the 

■whereof  is  Master  under  God 

or  whosoever  else  shall  go  for  Master  in  the  said  Ship  or  by  whatsoever 
other  name  or  names  the  same  ship,  or  the  Master  thereof,  is  or  shall  be 

named  or  called  in  the  sum  of £ 

on  Hull,   Materials,   Machinery  Boilers  valued  at £ 

Touching  the  adventures  and  perils  which  we  the  Assurers  are  contented 
to  bear  and  to  take  upon  us,  they  are  of  the  Seas,  men-of-war,  fire,  enemies, 
pirates,  robbers,  thieves,  jettisons,  letters  of   Mart  and   Countermart,   Sur- 

286 


APPENDIX    E  287 

prisals,  Takings  at  Sea,  arrests,  restraints  and  detainments  of  all  Kings, 
Princes  and  people  of  what  nature,  condition  or  quality  soever.  Barratry 
of  the  Master  and  Mariners,  and  of  all  other  Perils,  Losses  and  Misfortunes 
that  have  or  shall  come  to  the  Hurt,  Detriment  or  Damage  of  the  said 
Ship,  etc.,  or  any  part  thereof ;  and  in  case  of  any  Loss  or  Misfortune,  it 
shall  be  lawful  to  the  assured,  their  Factors,  servants  and  assigns,  to  sue, 
labor  and  travel  for,  in  and  about  the  Defense,  Safeguard  and  Recovery  of 
the  said  Ship,  etc.,  or  any  part  thereof  without  Prejudice  to  this  insurance; 
to  the  charges  whereof  we,  the  insurers  will  contribute.  And  it  is  especially 
declared  and  agreed  that  no  acts  of  the  insurer  or  insured  in  recovering, 
saving  or  preserving  the  property  insured  shall  be  considered  as  a  waiver 
or  acceptance  of  abandonment.  And  it  is  agreed  by  us  the  Insurers,  that 
this  writing  or  Policy  of  Assurance  shall  be  as  much  Force  and  Effect  as 
the  surest  writing  or  Policy  of  Assurance  heretofore  made  in  Lamb  Street 
or  in  the  Royal  Exchange  or  elsewhere  in  London. 

And  so  we,  the  Insurers,  are  contented,  do  hereby  promise,  and  bind  our- 
selves each  one  for  his  own  Part,  our  Heirs,  Executors,  and  Goods,  to  the 
'Assured,  their  Executors,  Administrators,  and  Assigns,  for  the  true  Per- 
formances of  the  Premises,  it  being  agreed  that  the  Assured,  shall  in  con- 
sideration thereof,  pay  to  us  The  Association  (hereinafter 

called  the  Association)   the  premium  and  entrance  fee  in  accordance  with 

Article  of  the  Articles  of  Association  of  the  Association,  and  shall, 

if  and  when  the  same  become  payable  further  pay  all  the  sums  and  con- 
tributions which  the  Association  shall  become  entitled  to  call  upon  the 
Assured,  as  a  member  or  members  of  the  Association,  to  pay  to  the  Asso- 
ciation according  to  the  Articles  of  Association  for  the  time  being  in  force. 

Note  i.  It  is  further  agreed  that  if  the  ship  hereby  insured  should  be 
captured  or  seized  and  shall,  while  such  capture  or  seizure  is  maintained, 
come  into  collision  with  any  other  ship  or  vessel,  and  the  assured  shall  in 
consequence  thereof  become  liable  to  pay  and  shall  pay  by  way  of  damages 
to  any  other  person  or  persons  any  sum  or  sums  not  exceeding  the  respect 
of  any  one  such  collision,  the  value  of  the  ship  hereby  insured  and  such 
liability  would  not  be  recoverable  under  the  policies  and  protection  referred 
to  in  clause  10  hereof,  the  Association  will  pay  the  assured  such  proportion 
of  three-fourths  of  such  sum  or  sums  so  paid  as  its  subscription  hereto  bears 
to  the  value  of  the  ship  hereby  insured,  and  in  case  in  which  the  liability 
of  the  ship  has  been  contested  or  proceedings  have  been  taken  to  limit 
liability  with  the  consent  of  writing  of  the  Association,  the  Association  will 
also  pay  a  like  proposition  of  three-fourths  of  the  costs  which  the  assured 
shall  thereby  incur  or  be  compelled  to  pay,  but  when  both  vessels  are  to 
blame,  then  unless  the  liability  of  the  owners  of  one  or  both  of  such  vessels 
becomes  cross  liabilities  as  of  the  owners  of  each  vessel  have  been  com- 
pelled to  pay  to  the  owners  of  the  other  vessels  such  a  one-half  or  such 
proportion  of  the  latter's  damages  as  may  have  been  properly  allowed  in 
ascertaining  the  balance  of  sum  payable  by  or  to  the  assured  in  consequence 
of  such  collisions.  Provided  always  that  this  clause  shall  in  no  case  extend 
to  any  sum  which  the  assured  may  become  liable  to  pay,  or  shall  pay  for 
removal  of  obstructions  under  statutory  powers,  for  injury  to  harbors, 
wharves,  piers  and  similar  structures,  consequent  on  such  collision  or  in 
respect  to  the  cargo  or  engagements  of  the  insured  vessel  or  for  loss  of  life 
or  personal  injury. 


288  EFFECTS    OF    THE   WAR    UPON    INSURANCE 

(i)  This  Policy  is  subject  to  the  Articles  of  Association  (note  2)*  for 
the  time  being  in  force  of  the  Association. 

(2)  This  Insurance  is  only  to  cover  (note  3)  the  following  risks,  namely: 
(a)  the  risks  of  capture,  seizure  and  detainment  by  the  King's  enemies  and 
the  consequences  thereof,  or  any  attempt  thereat,  and  all  consequences  of 
hostilities  or  war-like  operations  by  or  against  the  King's  enemies,  whether 
before  or  after  declaration  of  war,  and  (b)  The  risks  (other  than  risks  to 
capture,  seizure  or  detainment  by  the  King's  enemies  and  the  consequences 
thereof  or  any  attempt  thereat  or  the  consequences  of  hostilities  or  war-like 
operations  by  or  against  the  King's  enemies)  of  (note  4),  but  this  Insur- 
ance shall  not  be  subject  to  a  three  per  cent,  or  other  franchise  (note  3). 

Average  payable  without  deduction  of  thirds,  new  for  old,  whether  the 
average  be  particular  or  general  (note  6). 

General  Average  and  salvage  to  be  adjusted  according  to  the  law  and 
practice  obtaining  at  the  place  where  the  adventure  ends,  as  if  the  contract 
of  affreightment  contained  no  special  terms  upon  the  subject;  or  if  the  con- 
tract of  affreightment  so  provides,  according  to  York-Antwerp  t-Rules,  or 
in  the  case  of  wood  cargoes,  York-Antwerp  Rules  omitting  the  first  word 
of  rule  I   ("no")   (note  7). 

(3)  In  Respect  of  the  Risks  Mentioned  in  clause  (2a)  this  insurance  shall, 
notwithstanding  that  the  period  of  this  insurance  has  not  expired,  apply  to 
the  following  extent  and  no  further,  and  shall  to  the  like  extent  continue 
to  apply  notwithstanding  that  the  period  of  this  insurance  has  expired, 
namely : — 

(a)  If  the  ship,  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  on  a  voyage  to  a  British  or  friendly 
or  neutral  port  or  ports  with  cargo  or  passengers,  she  shall  be  held  covered 
until  her  arrival  at  the  port,  or  if  more  than  one,  the  last  of  the  ports  for 
which  she  has  on  board  cargo  or  passengers  shipped  before  war  was  declared 
or  hostilities  were  begun,  and  while  in  such  port  for  ten  clear  days  after 
arrival,  provided  that  if  such  port  is  not  a  safe  port  for  her  to  lie  in,  or  is 
a  friendly  port,  or,  being  a  neutral  port  ceases  to  be  neutral  before  the 
expiration  of  ten  clear  days  after  arrival,  she  shall  be  further  held  covered 
until  her  arrival  at  a  British  port  which  is  a  safe  port  for  her  to  lie  in,  or 
at  a  neutral  port  which  is  a  safe  port  for  her  to  lie  in,  and  which  for 
ten  clear  days  after  her  arrival  continues  to  be  neutral,  and  while  in  such 
port  for  ten  clear  days  after  arrival. 

(b)  If  the  ship,  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  on  a  voyage  to  a  British  or  friendly  or 
neutral  port  in  ballast,  she  shall  be  held  covered  until  her  arrival  at  the 
port  to  which  she,  at  the  time  when  war  is  declared  or  hostilities  are  begun, 
is  proceeding  in  ballast  and  while  in  such  port  for  ten  clear  days  after 
arrival,  provided  that  if  such  port  is  not  a  safe  port  for  her  to  lie  in,  or 
is  a  friendly  port,  or  being  a  neutral  port,  ceases  to  be  neutral,  before  the 
expiration  of  ten  clear  days  after  arrival,  she  shall  be  further  held  covered 

*  Notes  to  which  references  are  made  in  the  body  of  the  policy  have  been 
omitted. 


APPENDIX   E  289 

until  her  arrival  at  a  British  port  which  is  a  safe  port  for  her  to  lie  in,  or 
at  a  neutral  port  which  is  a  safe  port  for  her  to  lie  in,  and  which  for  ten 
clear  days  after  her  arrival  continues  to  be  neutral,  and  while  in  such  port 
for  ten  days  after  arrival. 

(c)  If  the  ship,  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  on  a  voyage  to  an  enemy's  port,  sh^ 
shall  be  held  covered  until  her  arrival  at  a  British  port  at  which  she  can 
discharge  her  cargo  and  passengers  and  which  is  a  safe  port  for  her  to  lie 
in,  or  a  neutral  port  at  which  she  can  discharge  her  cargo  and  her  pas- 
sengers and  which  is  a  safe  port  for  her  to  lie  in  and  which  for  ten  clear 
days  after  her  arrival  continues  to  be  neutral,  and  while  in  such  ports  for 
ten  days  after  her  arrival. 

(d)  If  the  ship  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  not  on  a  voyage  and  is  in  a  British 
port  which  is  a  safe  port  for  the  ship  to  lie  in,  she  shall  be  held  covered 
while  in  that  port  for  ten  days  from  the  time  war  is  declared  or  hostilities 
are  begun. 

(e)  If  the  ship,  at  the  time  war  is  declared  or  hostilities  are  begun  by  or 
against  the  King's  enemies,  is  not  on  a  voyage  and  is  in  a  neutral  port  which 
is  a  safe  port  for  the  ship  to  lie  in,  she  shall  be  held  covered  while  in  that 
port  for  ten  clear  days  from  the  time  when  war  is  declared  or  hostilities 
are  begun,  provided  that,  if  during  these  ten  days  such  port  cease  to  be 
neutral,  the  ship  shall  be  held  covered  as  provided  in  paragraph  (f)  of  this 
clause. 

(f)  If  the  ship,  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  not  on  a  voyage  and  is  (i)  in  a  British 
or  neutral  port  which  is  not  a  safe  port  for  a  ship  to  lie  in,  or  (2)  is  in  a 
neutral  port  which,  before  the  expiration  of  ten  clear  days  from  the  time 
when  war  is  declared  or  hostilities  are  begun,  ceases  to  be  neutral,  or  (3)  is 
in  a  friendly  port,  or  (4)  is  in  an  enemy's  port;  she  shall  be  held  covered 
until  her  arrival  at  a  British  port  which  is  a  safe  port  for  the  ship  to  lie  in, 
or  at  a  neutral  port  which  is  a  safe  port  for  the  ship  to  lie  in,  and  which  for 
ten  clear  days  after  her  arrival  continues  to  be  neutral,  and  while  in  such 
port  for  ten  clear  days  after  arrival. 

(g)  The  ship  shall  be  deemed  to  be  on  a  voyage  from  the  time  when  she 
ships  cargo  or  passengers  for  a  voyage  or,  if  in  ballast,  from  the  time  when 
she  clears  in  ballast  for  a  voyage. 

(h)  The  term  "a  British  Port"  shall  mean  a  port  in  the  British  Islands 
or  in  a  British  possession  and  the  terms  "  British  Islands "  and  "  British 
possession  "  shall  have  the  meaning  given  them  respectively  by  section  18 
of  the  Interpretation  Act,  1889.  The  term  "friendly  port"  shall  mean  a 
port  of  a  friendly  belligerent. 

(4)  The  assured  warrants  that  the  ship  is  continuously  registered  in  the 
United  Kingdom   (note  8). 

(5)  The  assured  further  warrants: 

A.  Note.  The  Association  will  here  insert  the  warrant  applicable  to  the 
risks  mentioned  in  clause  2  (b). 


290  EFFECTS   OF   THE   WAR   UPON   INSURANCE 

B.  (i) — That,  when  Great  Britain  is  at  war,  the  ship  shall  comply,  so  far 
as  possible,  with  the  orders  of  His  Majesty's  Government  and  the  direc- 
tions of  the  committee  as  to  routes,  ports  of  call,  and  stoppages. 

(2)  That  the  ship  shall  leave  an  enemy's  port  within  the  days  of  grace 
allowed  by  the  enemy  and  shall  comply  with  the  terms  of  any  pass  granted 
by  the  enemy.  Provided  always  that  (i)  in  the  event  of  loss  by  any  of  the 
risks  mentioned  in  clause  2  (a)  the  breach  of  any  of  the  warranties  men- 
tioned in  this  clause,  other  than  warranties  B  (i)  and  (2),  shall  not  operate 
to  invalidate  the  insurance  or  to  defeat  a  claim  and  (2)  in  the  event  of 
loss  by  any  of  the  risks  insured  against  by  the  policy,  the  breach  of  any 
of  the  warranties  mentioned  in  this  clause,  including  warranties  B  (1)  and 
(2),  shall  not  operate  to  invalidate  the  insurance  or  to  defeat  a  claim  if 
the  assured  can  satisfy  the  committee  (of  which  the  committee  shall  be  the 
sole  judge)  that  such  breach  happened  without  the  fault  or  privity  of  the 
assured  and  of  the  owners  and  managers  of  the  ship,  or  was  committed  in 
order  to  avoid  loss  by  any  of  the  risks  mentioned  in  clause  2  (a). 

(6)  The  committee  shall  have  the  sole  right  of  determining  the  date  at 
which  war  is  to  be  deemed  to  have  been  declared  or  hostilities  to  have  been 
begun  and  what  is  and  what  is  not  a  safe  port. 

(7)  If  war  is  declared  or  hostilities  are  begun  by  or  against  Great  Britain, 
the  assured  shall  give  the  committee  full  information  of  the  employment  and 
position  of  the  ship  insured  and  any  other  information  required  by  the  com- 
mittee and  when  Great  Britain  is  neutral  shall  at  all  times  give  the  informa- 
tion upon  demand  (note  9). 

(8)  (a)  In  the  event  of  a  loss  by  capture,  seizure  or  other  like  peril 
within  the  risk  mentioned  in  clause  2  (a),  the  Association  shall  not  be 
bound  to  pay  any  claim  in  respect  thereof,  until  the  expiration  of  183  days 
from  the  date  of  loss,  but  if  payment  is  so  postponed  by  the  Association,  it 
shall  pay  interest  thereon  at  the  rate  of  4  per  cent  per  annum  from  the 
date  of  loss.  Provided  always  that  if  before  the  expiration  of  such  183 
days  the  ship  be  recaptured  or  released  or  restored  to  the  assured  there  shall 
be  no  claim  upon  the  Association  for  any  loss  in  respect  of  or  arising  out 
of  such  capture,  seizure,  detention  or  other  like  peril  other  than  the  follow- 
ing, namely :  (a)  the  cost  to  repair  damage  received  by  the  ship  by  reason 
of  the  capture,  seizure,  detention  or  other  like  peril;  (b)  the  expenses  in- 
curred in  respect  of  the  ship  by  reason  of  the  capture,  seizure,  detention  or 
other  like  perils  and  the  release  of  the  ship;  (c)  a  sum  equal  to  10  per  cent 
per  annum  on  the  insured  value  hereinbefore  mentioned  from  the  date  of 
capture  or  seizure  or  beginning  of  the  detention  until  the  date  of  release. 

(b)  In  the  event  of  a  total  loss  by  any  of  the  risks  mentioned  in  clause 
(a)  the  amount  due  hereunder  shall  be  paid  by  equal  installments  at 
6-9-12  months  from  the  date  of  loss,  but  such  installments  shall  carry  interest 
from  the  date  of  loss  at  the  rate  of  4  per  cent  per  annum  (note  10). 

(9)  A  Ship  Entered  in  This  Association  shall  cease  to  be  Insured : 

(a)  From  the  date  of  the  legal  transfer  of  such  ship  or  a  transfer  of  the 
management  of  the  ship  by  the  member  or  his  firm  unless  with  the  written 
consent  of  the  Association. 


APPENDIX    E  ■  291 

(b)  If  default  is  made  in  payment  of  any  call  within  the  time  fixed  accord- 
ing to  the  Articles  of  Association. 

(c)  If  the  member  becomes  bankrupt  or  insolvent,  unless  before  a  claim 
arises  an  undertaking  approved  by  the  committee  registered  by  them  has 
been  given  to  pay  all  contributions  due  or  to  become  due. 

(d)  If  any  person  giving  an  undertaking  under  this  rule  fail  to  discharge 
his  liability  within  seven  days  of  notice  being  posted  to  him  of  a  claim 
upon  him. 

So  long  as  any  member  is  uninsured  in  consequence  of  the  operation  of 
this  clause,  there  shall  be  no  liability  on  the  part  of  this  Association  for  any 
previous  or  subsequent  claims,  but  the  member  shall  nevertheless  remain 
liable  for  contributions  for  all  losses  and  expenses  up  to  the  date  fixed  by 
this  policy  for  its  expiration.  The  committee,  however,  may  at  their  discre- 
tion admit  the  claim  of  such  member  to  the  extent  of  the  contributions  which 
he  is  liable  to  pay  to  the  intent  that  such  claims  may  be  set  off  against  such 
contributions  (note  11). 

(10)  The  said  ship  shall  be  deemed  to  be  at  all  times  fully  insured  against 
all  perils  covered  by  an  ordinary  Lloyd's  policy,  with  collision  clause  attached 
(note  12)  and  containing  an  F.  C.  &  S.  Clause  in  the  following  terms : 

Warranted  free  from  capture,  seizure,  and  detention  and  the  consequences 
thereof  or  any  attempt  thereat,  barratry,  piracy,  riots  and  civil  commotions 
excepted  and  also  from  all  consequences  of  hostilities  or  warlike  operations 
whether  before  or  after  declaration  of  war,  and  to  be  fully  entered  in  the 

Protection  Association  Limited,  and  no  claim  whatever  against 

which  a  ship  is  deemed  to  be  otherwise  insured  or  protected  as  aforesaid 
or  against  which  she  is  in  fact  insured  or  protected  by  any  other  insurance 
policy  or  Protection  Association  shall  be  recoverable  under  this  policy. 

(11)  In  ascertaining  whether  a  ship  is  a  constructive  total  loss,  the  insured 
value  shall  be  taken  as  the  repaired  value,  and  nothing  in  respect  of  the 
damaged  or  breaking  up  value  of  the  ship  shall  be  taken  into  account. 

(12)  In  the  event  of  total  or  constructive  total  loss,  no  claim  to  be  made 
by  the  Association  for  freight  or  passage  moneys,  whether  notice  of  aban- 
donment has  been  given  or  not  (note  13). 

(13)  Prompt  notice  of  any  loss,  or  of  the  happening  of  any  event  which 
is  likely  to  give  rise  to  a  claim,  shall  be  given  in  writing  to  the  Association, 
failing  which  the  committee  may,  in  their  absolute  discretion,  refuse  to  admit 
the  claim  or  make  such  deduction  therefrom  as  they  may  think  fit  (note  14). 

In  witness  whereof,  the  Association  have  on  the  day  of 

191- 

Secretary. 


292  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

Schedule  II 

Form  of  Reinsurance   Policy  to  be   Issued  by   His   Majesty's   Government 

under  Clause  i 

The  Association. 

Be  it  Known  that 

as  well  in own  name  as  for  and  in  the  name  and 

names  of  all  and  every  other  person  or  persons  to  whom  the  same  doth, 
may,  or  shall  appertain  in  part  or  in  all,  doth,  subject  to  the  provisions 
hereinafter  contained  and  referred  to,  make  assurance  with  His  Majesty's 
Government  and  cause  them  and  every  one  of  them,  to  be  insured  lost  or  not 
lost,  for  and  during  the  period  from to ,  both  days  in- 
clusive, beginning  and  ending  with  Greenwich  mean  time.  In  port  and  at  sea, 
at  all  times,  in  all  places  and  on  all  occasions,  services  and  trades  what- 
soever and  wheresoever,  under  steam  and  sail  with  leave  to  sail  with  or  with- 
out pilots,  to  tow  and  assist  vessels  or  craft  in  all  situation^  and  to  be 
towed.  Upon  the  Body,  Tackle,  Apparel,  Ordnance,  Munition,  Artillery, 
Boat  and  other  Furniture,  of  and  in  the  good  ship   or  vessel  called  the 

whereof  is  Master,  under  God,   

or  whosoever  shall  go  for  Master  in  the  said  ship,  or  by  whatsoever  other 
name  or  names  the  same  ship,  or  Master  thereof,  is  or  shall  be  named  or 

called   in   the   sum   of 

being  80  per  cent  of on  Hull,  Materials,  Machinery,  Boilers,  etc. 

It  is  further  agreed  that  this  insurance  shall  cover  the  liability  of  the 
Association  under  the  collision  clause  in  the  original  policy,  if  the  ship  came 
into  collision  while  captured  or  seized  by  the  King's  enemies. 

Touching  the  adventures  and  perils  which  we  the  Assurers  are  contented 
to  bear  and  to  take  upon  us,  they  are  of  the  Seas,  men-of-war,  fire,  enemies, 
pirates,  robbers,  thieves,  jettisons,  letters  of  Mart  and  Countermart,  Sur- 
prisals.  Takings  at  Sea,  arrests,  restraints,  and  detainments  of  all  Kings, 
Princes  and  people  of  what  nature,  condition  or  quality  soever.  Barratry 
of  the  Master  and  Mariners,  and  of  all  other  Perils,  Losses  and  Misfortunes 
that  have  or  shall  come  to  the  Hurt,  Detriment  or  Damage  of  the  said 
Ship,  etc.,  or  any  part  thereof ;  and  in  case  of  any  Loss  or  Misfortune,  it 
shall  be  lawful  to  the  assured,  their  Factors,  servants,  and  assigns,  to  sue, 
labor  and  travel  for,  in  and  about  the  Defense,  Safeguard,  and  Recovery 
of  the  said  Ship,  etc.,  or  any  part  thereof  without  Prejudice  to  this  insurance ; 
to  the  charges  whereof  we,  the  insurers  will  contribute.  And  it  is  especially 
declared  and  agreed  that  no  acts  of  the  Insurer  or  insured  in  recovering, 
saving  or  preserving  the  property  insured  shall  be  considered  as  a  waiver 
or  acceptance  of  abandonment.  And  it  is  agreed  by  us  the  Insurers,  that 
this  writing  or  Policy  of  Assurance  shall  be  as  much  Force  and  Effect  as 
the  surest  writing  or  Policy  of  Assurance  heretofore  made  in  Lamb  Street 
or  in  the  Royal  Exchange  or  elsewhere  in  London. 


APPENDIX    E  293 

Now  this  Policy  Witnesseth  that  His  Majesty's  Government  takes  upon 
itself  the  burden  of  this  insurance  and  promises  and  binds  itself  and  its 
successors  to  the  assured,  their  executors,  administrators  and  assigns  for  the 
true  performance  of  the  Premises. 

I.   This  insurance  is  a  Reinsurance  of  the  risks. 

Underwritten  by  the  Association,  Limited,  and  is 

subject  to  the  same  clauses  and  conditions  as  are  contained  in  the  form  of 
policy  in  Schedule  I  to  the  agreement  between  the  Association  and  His 
Majesty's  Government. 

1914,  but: — 

(i)  This  insurance  shall  cover  only  the  risk  of  capture,  seizure,  and  detain- 
ment by  the  King's  enemies,  whether  before  or  after  declaration  of  war. 

(2)  This  insurance  shall  apply  only  from  the  time  when  war  is  declared 
or  hostilities  are  begun  by  or  against  Great  Britain. 

This  insurance  shall,  notwithstanding  that  the  Period  of  this  insurance  has 
not  expired,  apply  to  the  following  extent,  continue  to  apply,  notwithstand- 
ing that  the  period  of  this  insurance  has  expired,  namely : 

(A)  If  the  ship,  at  the  time  when  Avar  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  on  a  voyage  to  a  British  or  friendly 
or  neutral  port  or  ports  with  cargo  or  passengers,  she  shall  be  held  covered 
until  her  arrival  at  the  port,  or,  if  more  than  one,  the  last  of  the  ports  for 
which  she  has  on  board  cargo  or  passengers  shipped  before  war  was  declared 
or  hostilities  were  begun,  and  while  in  such  port  for  ten  clear  days  after 
arrival,  provided  that  if  such  port  is  not  a  safe  port  for  the  ship  to  lie  in 
or  is  a  friendly  port,  or,  being  a  neutral  port  ceases  to  be  neutral  before 
the  expiration  of  ten  clear  days  after  arrival,  she  shall  be  further  held  cov- 
ered until  her  arrival  at  a  British  port  which  is  a  safe  port  for  her  to  lie 
in,  or  at  a  neutral  port  which  is  a  safe  port  for  her  to  lie  in,  and  which  for 
ten  clear  days  after  her  arrival  continues  to  be  neutral,  and  while  in  such 
port  for  ten  clear  days  after  arrival. 

(B)  If  the  ship,  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  on  a  voyage  to  a  British  or  friendly 
or  neutral  port  in  ballast,  she  shall  be  held  covered  until  her  arrival  at  the 
port  to  which  she,  at  the  time  when  war  is  declared  or  hostilities  are  begun, 
is  proceeding  in  ballast  and  while  in  such  port  for  ten  clear  days  after 
arrival,  provided  that  if  such  port  is  not  a  safe  port  for  the  ship  to  lie  in, 
or  is  a  friendly  port,  or  being  a  neutral  port,  ceases  to  be  neutral,  before 
the  expiration  of  ten  clear  days  after  arrival,  she  shall  be  further  held  cov- 
ered until  her  arrival  at  a  British  port  which  is  a  safe  port  for  her  to  lie  in, 
or  at  a  neutral  port  which  is  a  safe  port  for  her  to  lie  in,  and  which  for 
ten  clear  days  after  her  arrival  continues  to  be  neutral,  and  while  in  such 
port  for  ten  clear  days  after  arrival. 

(C)  If  the  ship,  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  on  a  voyage  to  an  enemy's  port,  she 
shall  be  held  covered  until  her  arrival  at  a  British  port  at  which  she  can 
discharge  her  cargo  and  passengers  and  which  is  a  safe  port  for  her  to  lie 
in,  or  a  neutral  port  at  which  she  can  discharge  her  cargo  and  passengers 


294  EFFECTS    OF    THE   WAR    UPON    INSURANCE 

and  which  is  a  safe  port  for  her  to  lie  in  and  which  for  ten  clear  days 
after  her  arrival  continues  to  be  neutral,  and  while  in  such  port  for  ten 
clear  days  after  arrival. 

(D)  If  the  ship,  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  not  on  a  voyage  and  is  in  a  British  port 
which  is  a  safe  port  for  the  ship  to  lie  in,  she  shall  be  held  covered  while  in 
that  port  for  ten  clear  days  from  the  time  when  war  is  declared  or  hostilities 
are  begun. 

(E)  If  the  ship,  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  not  on  a  voyage  and  is  in  a  neutral 
port  which  is  a  safe  port  for  the  ship  to  lie  in,  she  shall  be  held  covered 
while  in  that  port  for  ten  clear  days  from  the  time  when  war  is  declared  or 
hostilities  are  begun,  provided  that,  if  during  such  ten  days  such  port  ceases 
to  be  neutral,  the  ship  shall  be  held  covered  as  provided  in  paragraph  (F) 
of  this  clause. 

(F)  If  the  ship,  at  the  time  when  war  is  declared  or  hostilities  are  begun 
by  or  against  the  King's  enemies,  is  not  on  a  voyage  and  is  (i)  "in  a  British 
or  neutral  port  which  is  not  a  safe  port  for  the  ship  to  He  in,  or  (2)  is  in 
a  neutral  port  which,  before  the  expiration  of  ten  clear  days  from  the  time 
when  war  is  declared  or  hostilities  are  begun,  ceases  to  be  neutral,  or  (3)  is 
in  a  friendly  port,  or  (4)  is  in  an  enemy's  port;  she  shall  be  held  covered 
until  her  arrival  at  a  British  port  which  is  a  safe  port  for  the  ship  to  lie  in, 
or  at  a  neutral  port  which  is  a  safe  port  for  the  ship  to  lie  in  and  which 
for  ten  clear  days  after  her  arrival  continues  to  be  neutral  and  while  in  such 
port  for  ten  clear  days  after  arrival. 

(G)  The  ship  shall  be  deemed  to  be  on  a  voyage  from  the  time  when  she 
ships  cargo  or  passengers  for  a  voyage  or,  if  in  ballast,  from  the  time  when 
she  clears  in  ballast  for  a  voyage. 

(H)  The  term  "a  British  port"  shall  mean  a  port  in  the  British  Islands 
or  in  a  British  Possession,  and  the  terms  "  British  Islands "  and  "  British 
Possession  "  shall  have  the  meaning  given  them  respectively  by  Paragraph 
18  of  the  Interpretation  Act,  1889.  The  term  "Friendly  Port"  shall  mean 
the  Port  of  a  friendly  belligerent. 

2.  This  insurance  is  granted  without  premium  in  consideration  of  the 
Association  as  original  insuring  or  having  at  request  of  His  Majesty's  Gov- 
ernment insured  the  subject  matter  of  this  insurance  against  the  like  risks. 

3.  Valued  as  in  the  original  policy  or  policies. 

4.  To  pay  as  may  be  paid  on  the  original  policy  or  policies  to  the  extent 
of  80  per  cent,  of  the  liability  of  the  said  Association  thereon  and  the 
settlement  of  a  loss  by  the  Committee  of  the  Association,  unless  dissented 
from  in  writing  by  the  representatives  on  such  Committee  of  His  Majesty's 
Government  to  be  accepted  as  final  and  conclusive. 


APPENDIX   E  295 


Schedule  III 

Form  of  Policy  to  be  Issued  by  the  Association  to  Cover  New  Voyages 
after  Outbreak  of  War 

The  Association. 

Be  it  Known  that 

as  well  in own  name  as  for  and  in  the  name  and 

names  of  all  and  every  other  person  or  persons  to  whom  the  same  doth, 
may,  or  shall  appertain  in  part  or  in  all,  doth,  subject  to  the  provisions  here- 
inafter contained  and  referred  to,  make  assurance  and  cause  them  and  every 

one  of  them,  to  be  insured  lost  or  not  lost,  at  and  from to 

(and  thence  to and  while  there  and  thereto) 

and  while  there  for  thirty  days  after  arrival  or  until  succeeding  voyage  or 
Time  Policy  against  the  risks  hereby  insured  attaches  whichever  period  shall 
be  less  with  leave  in  this  voyage  to  proceed  and  sail  to  and  touch  and  stay 
at  any  ports  or  places  whatsoever  without  prejudice  to  this  insurance  and 
to  sail  with  or  without  pilots,  to  tow  and  assist  vessels  or  craft  in  all  situa- 
tions, and  to  be  towed 

upon  the  Body,  Tackle,  Apparel,  Ordnance,  Munition,  Artillery,  Boat 
and  other  Furniture  of  and  in  the  Ship  or  Vessel  called  the 

whereof  is  Master,  under  God, 

or  whosoever  else  shall  go  for  Master  in  the  said  Ship,  or  by  whatsoever 
other  name  or  names  the  same  Ship,  or  the  Master  thereof,  is  or  shall  be 

named  or  called,    

in   the   sum  of on   Hull,   Materials,   Machinery, 

Boilers,  etc.,  valued  at 

It  is  further  agreed  that  this  insurance  shall  cover  the  liability  of  the 
Association  under  the  collision  clause  in  the  original  policy,  if  the  ship  came 
into  collision  while  captured  or  seized  by  the  King's  enemies. 

Touching  the  adventures  and  perils  which  we  the  Assurers  are  contented 
to  bear  and  to  take  upon  us,  they  are  of  the  Seas,  men-of-war,  fire,  enemies, 
pirates,  robbers,  thieves,  jettisons,  letters  of  Mart  and  Countermart,  Sur- 
prisals,  Takings  at  Sea,  arrests,  restraints,  and  detainments  of  all  Kings, 
Princes  and  people  of  what  nature,  condition  or  quality  soever.  Barratry 
of  the  Master  and  Mariners,  and  of  all  other  Perils,  Losses  and  Misfortunes 
that  have  or  shall  come  to  the  Hurt,  Detriment  or  Damage  of  the  said 
Ship,  etc.,  or  any  part  thereof ;  and  in  case  of  any  Loss  or  Misfortune,  it 
shall  be  lawful  to  the  assured,  their  Factors,  servants,  and  assigns,  to  sue, 
labor,  and  travel  for,  in  and  about  the  Defense,  Safeguard,  and  Recovery 
of  the  said  Ship,  etc.,  or  any  part  thereof  without  Prejudice  to  this  insurance; 
to  the  charges  whereof  we,  the  insurers  will  contribute.  And  it  is  especially 
declared  and  agreed  that  no  acts  of  the  Insurer  or  insured  in  recovering, 
saving  or  preserving  the  property  insured  shall  be  considered  as  a  waiver 


296  EFFECTS    OF   THE   WAR    UPON    INSURANCE 

or  acceptance  of  abandonment.  And  it  is  agreed  by  us  the  Insurers,  that 
this  writing  or  Policy  of  Assurance  shall  be  as  much  Force  and  Eflfect  as 
the  surest  writing  or  Policy  of  Assurance  heretofore  made  in  Lamb  Street 
or  in  the  Royal  Exchange  or  elsewhere  in  London. 

And  so  we,  the  Insurers,  are  contented  and  do  hereby  promise  and  bind 
ourselves,  each  one  for  his  own  part,  our  Heirs,  Executors,  and  Goods,  to 
the  Assured,  their  Executors,  Administrators  and  Assigns,  for  the  true  Per- 
formance of  the  Premises,  it  being  agreed  that  the  Assured,  shall  in  con- 
sideration thereof,  pay  to  us  The  Association  (hereinafter 

called  the  Association)  a  premium  at  and  after  the  rate  of  ,  and  shall, 

if  and  when  the  same  become  payable,  further  pay  all  the  sums  and  contri- 
butions which  the  Association  shall  become  entitled  to  call  upon  the  Assured, 
as  a  member  or  members  of  the  Association  to  pay  to  the  Association  accord- 
ing to  the  Articles  of  Association  for  the  time  being  in  force.     Warranted 

to  sail  on  or  before  ,  but  in  the  event  of  the  vessel  sailing 

after  that  time  it  is  agreed  to  hold  the  Assured  covered  at  the  rate  of  pre- 
mium for  the  time  being  fixed  by  His  Majesty's  Government.       •■ 

(i)  This  Insurance  Is  Only  To  Cover  (note  2)'  the  risks  of  capture, 
seizure,  and  detainment  by  the  King's  enemies  and  the  consequences  thereof, 
or  any  attempt  thereat,  and  all  consequences  of  hostilities  or  warlike  opera- 
tions by  or  against  the  King's  enemies,  whether  before  or  after  declaration 
of  war,  but  this  Insurance  shall  not  be  subject  to  a  3  per  cent,  or  other 
franchise  (note  3). 

Average  payable  without  deduction  of  thirds,  new  for  old,  whether  the 
average  be  particular  or  general  (note  4). 

General  average  and  salvage  to  be  adjusted  according  to  the  law  and 
practice  obtaining  at  the  place  where  the  adventure  ends,  as  if  the  contract 
of  affreightment  so  provides,  according  to  York-Antwerp  Rules,  or,  in  the 
case  of  wood  cargoes,  York-Antwerp  Rules  omitting  the  first  word  of 
Rule  I   ("no")    (note  5). 

(2)  This  Policy  Is  Subject  to  The  Articles  of  Association  (note  6). 
For  the  Time  Being  in  Force  of  the  Association. 

(3)  The  Assured  Warrants  that  the  ship  is  throughout  the  voyage  regis- 
tered in  the  United  Kingdom  (note  7). 

(4)  The  Assured  Further  Warrants : — 

(A)  That  the  ship  shall  comply,  so  far  as  possible,  with  the  orders 
of  His  Majesty's  Government  and  the  directions  of  the  Committee  as 
to  routes,  ports  of  call,  and  stoppages. 

(B)  That  the  ship  shall  not  start  on  the  voyage  if  ordered  by  His 
Majesty's  Government  not  to  do  so. 

(C)  That  the  ship  shall  leave  an  enemy's  port  within  the  days  of 
grace  allowed  by  the  enemy,  and  shall  comply  with  the  terms  of  any 
pass  granted  by  the  enemy. 

(D)  That  the  ship  shall  not  enter  or  leave,  or  attempt  to  enter  or 

'  Notes  to  which  references  are  made  in  the  body  of  the  policy  have  been 
omitted. 


APPENDIX   E  297 

leave,  any  port  which  is  known  to  be  blockaded  by  the  enemy.  Pro- 
vided always  that  the  breach  of  any  of  the  warranties  mentioned  in 
this  clause  shall  not  operate  to  invalidate  the  insurance  or  to  defeat 
a  claim  if  the  assured  can  satisfy  the  Committee  (of  which  Com- 
mittee shall  be  the  sole  judge)  that  such  breach  happened  without  the 
fault  or  privity  of  the  assured  and  of  the  owners  and  managers  of 
the  ship. 

(5)  If  the  ship  is  prevented  by  His  Majesty's  Government  from  starting 
on  the  voyage,  the  assured  may,  at  his  option,  require  this  policy  to  be  can- 
celed and  the  premium  to  be  returned. 

(6)  The  assured  shall,  upon  demand,  give  the  Committee  full  informa- 
tion of  the  employment  and  position  of  the  ship  insured  and  any  other 
information  required  by  the  Committee. 

(7)  (I)  In  the  event  of  a  loss  by  capture,  seizure,  or  detainment,  the  Asso- 
ciation shall  not  be  bound  to  pay  any  claim  in  respect  thereof  until  the 
expiration  of  183  days  from  the  date  of  loss,  but  if  payment  is  so  postponed 
by  the  Association,  it  shall  pay  interest  thereon  at  the  rate  of  4  per  cent,  per 
annum  from  the  date  of  loss.  Provided  always  that  if  before  the  expiration 
of  such  183  days  the  ship  be  recaptured  or  released  or  restored  to  the 
assured  there  shall  be  no  claim  upon  the  Association  for  any  loss  in  respect 
of  or  arising  out  of  such  capture,  seizure,  or  detainment  other  than  the  fol- 
lowing, namely:  (A)  the  cost  of  repair  of  damage  received  by  the  ship  by 
reason  of  the  capture,  seizure,  or  detainment,  (B)  the  expenses  incurred  in 
respect  of  the  ship  by  reason  of  the  capture,  seizure,  or  detainment  and  the 
release  of  the  ship,  (C)  a  sum  equal  to  10  per  cent,  per  annum  on  the  insured 
value  hereinbefore  mentioned  from  the  date  of  capture  or  seizure  or  begin- 
ning of  the  detainment  until  the  date  of  release. 

(II)  In  the  event  of  a  total  loss  under  this  policy  the  amount  due  here- 
under to  be  paid  by  equal  installments  at  six,  nine,  and  twelve  months  from 
the  date  of  loss,  but  such  installments  shall  carry  interest  from  the  date  of 
loss  at  the  rate  of  4  per  cent,  per  annum. 

(8)  A  Ship  Entered  in  This  Association  Shall  Cease  to  Be  Insured: — 

(A)  From  the  date  of  the  legal  transfer  of  such  ship  or  transfer 
of  the  management  of  the  ship  by  the  member  or  his  firm,  unless  with 
the  written  consent  of  the  Association. 

(B)  If  default  is  made  in  payment  of  any  call  within  the  time  fixed 
according  to  the  Articles  of  Association. 

(C)  If  the  member  becomes  bankrupt  or  insolvent  unless  before  a 
claim  arises  an  undertaking  approved  by  the  Committee  and  registered 
by  them  has  been  given  to  pay  all  contributions  due  or  to  become  due. 

(D)  If  any  person  giving  an  undertaking  under  this  rule  fail  to 
discharge  his  liability  within  seven  days  of  notice  being  posted  to  him 
of  a  claim  upon  him. 

So  long  as  any  member  is  uninsured  in  consequence  of  the  operation  of 
this  clause  there  shall  be  no  liability  on  the  part  of  this  Association  for  any 
previous  or  subsequent  claims,  but  the  member  shall  nevertheless  remain 
liable  for  contributions  for  all  losses  and  expenses  up  to  the  date  fixed  by 


298  EFFECTS   OF   THE   WAR   UPON    INSURANCE 

this  policy  for  its  expiration.  The  Committee,  however,  may  at  their  discre- 
tion admit  the  claims  of  such  member  to  the  extent  of  the  contributions 
which  he  is  liable  to  pay  to  the  intent  that  such  claims  may  be  set  off  against 
such  contributions  (note  8). 

(9)  The  said  ship  shall  be  deemed  to  be  at  all  times  fully  insured  against 
all  perils  covered  by  an  ordinary  Lloyd's  policy,  with  collision  clause  attached 
(note  9)  and  containing  an  F.  C.  &  S.  clause  in  the  following  terms : 

Warranted  free  from  capture,  seizure  and  detention,  and  the  con- 
sequences thereof  or  any  attempt  thereat,  barratry,  piracy,  riots  and 
civil  commotions  excepted  and  also  from  all  consequences  of  hostili- 
ties or  warlike  operations  whether  before  or  after  declaration  of  war. 

and  to  be  fully  entered  in  the Protection  Association 

Limited,  and  no  claim  whatever  against  which  a  ship  is  deemed  to  be  other- 
wise insured  or  protected  as  aforesaid  or  against  which  she  is  in  fact  insured 
or  protected  by  any  other  insurance  policy  or  Protection  Association  shall 
be  recoverable  under  this  policy. 

(10)  In  ascertaining  whether  a  ship  is  a  constructive  total  loss,  the  insured 
value  shall  be  taken  as  the  repaired  value,  and  nothing  in  respect  of  the 
damaged  or  breaking  up  value  of  the  ship  shall  be  taken  into  account. 

(11)  In  the  event  of  total  or  constructive  total  loss  no  claim  to  be  made 
by  the  Association  for  freight  or  passage  moneys,  whether  notice  of  aban- 
donment has  been  given  or  not  (note  10). 

(12)  Prompt  notice  of  any  loss,  or  of  the  happening  of  any  event  which 
is  Hkely  to  give  rise  to  a  claim,  shall  be  given  in  writing  to  the  Association, 
failing  which  the  Committee  may,  in  their  absolute  discretion,  refuse  to 
admit  the  claim  or  make  such  deduction  therefrom  as  they  may  think  fit 
(note  11), 


INDEX 


Accident  insurance:  taxation,  loi;  in  Ger- 
many, 165;  in  Switzerland,  173;  in  Den- 
mark,  174. 

Aerial   insurance.      See  Airplane  insurance. 

Agents  of  the  enemy,  American  court  de- 
cisions concerning,   33. 

Airplane  insurance,  12;  in  England,  217; 
in   Germany,    220. 

Alien  enemies:  British  proclamation  con- 
cerning, 16;  public  custodian  for  prop- 
erty of,  17;  forbidden  to  write  policies 
of  marine  or  war  risk  insurance,  22; 
American  court  decisions  concerning,  25; 
English    court    decisions    concerning,    34. 

Alien  Property  Custodian,    17,  23s,  238. 

Allotments,  family:  in  United  States,  146, 
262;  in  Canada,  157;  in  England,  160; 
in  France,  162;  in  Germany,  169;  in 
Austria-Hungary,  171;  in  Italy,  172;  in 
Switzerland,    174. 

Allowances.      See  Allotments,    family. 

Amalgamations  in  marine  insurance:  Eng- 
lish,   196;    German,    203. 

American  court  decisions  on  war  insur- 
ance contracts,   25. 

Amount  of  life  insurance  written,  eflfect 
of  war  on,  49;  English  statistics,  50; 
Japanese  business  from  1880  to  1914, 
51;  Canadian  statistics,  52;  in  Germany, 
52;  in  Russia,  53;  lapses  and  surrender 
of  policies,   53!   loans   on   policies,   55. 

Application  blanks  for  United  States  gov- 
ernment insurance:  vessel,  272;  cargo, 
273;   freight,  274;   crew,  275. 

Army  Nurse  Corps,  insurance  for,  126, 
135,    147,   26s,    268,   269. 

Association  of  Life  Insurance  Presidents, 
report  to,    64. 

Australia,  Rovcrnment  insurance  in,  44; 
participation  of  life  companies  in  gov- 
ernment  loans,   96. 

Austria-Hungary:  war  clause  in  life  in- 
surance companies,  79;  social  insurance, 
171;  fire  reinsurance,  213;  fire  insur- 
ance,  242. 

Aviation:  application  of  war  risk  clauses 
to,   in   Great   Britain,   77. 

Bombardment   insurance,    11,    217. 

British  court  decisions  during  present  war, 
34- 

British  fire  insurance  stocks,  table  showing, 
226. 

British  government  aid  to  insurance:  ma- 
rine,   181;    airplane,    217. 

British  marine  companies,  private:  business 
transacted  by,  189;  loss  settlements  of, 
190;  statistics,  192,  193,  1^4;  effect  of 
high    rates,    194;    amalgamations,    196. 

Burial   expenses,   allowances   for,    147. 

Canada:  early  effects  on  life  insurance  in, 
51;  statistics,  52;  government  loans  in, 
96;  mortality  experience  of,  in;  social 
insurance   and    pensions  in,    157. 

Canadian   Patriotic  Fund,   157. 


Cargo  insurance  by  United  States  Govern- 
ment: act  providing  for.  249;  instruc- 
tions concerning,  251;  application  blank 
for,   273;   form  of  policy,   282. 

Chino-Japanese  War,  death  rate  for  Jap- 
anese  Army,   61. 

Civil    War,   death   rate   in,   61. 

Contracts  and  the  war,  14;  court  decisions 
concerning:  American,  25;  British,  34; 
terms   of   life   policies,    57. 

Court  decisions  on  status  of  war  insurance 
contracts:  American  cases,  25;  English 
cases    during    present    war,    34. 

Crew  insurance  by  United  States  Govern- 
ment: act  providing  for,  253;  applica- 
tion blank  for,  275;   form  of  policy,  276. 

Deaths  due  to  present  war,  table  showing, 
109. 

Denmark,  social  insurance  in,  174;  fire 
reinsurance   companies   in,   216. 

Depreciation  in  securities  of  life  insurance 
companies:  in  United  States,  85;  in  Eng- 
land,  87. 

Development  of  insurance,   scientific,   4. 

Disability  clause  in  life  insurance  policies, 
71,    140. 

Disability  insurance:  United  States,  140, 
148,  265;  Canada,  157;  England,  160; 
France,  163;  Germany,  170;  Austria- 
Hungary,  171;   Italy,   172. 

Enemy,  agents  of  the:  American  court  de- 
cisions concerning,   33. 

Enemy  fire  insurance  companies  in  United 
States:  status  of,  231;  statistics,  233, 
236;  exclusion  of,  234.  See  also  Alien 
enemies. 

England:  status  of  alien  enemies,  15;  regu- 
lations, 24;  court  decisions,  34;  early 
effects  on  life  companies,  50;  war  clause 
in  life  companies,  72;  finances  of  life 
companies,  87;  mortality  experience,  113; 
social  insurance,  158;  public  aid  to  ma- 
rine insurance,  181, _  286;  fire  reinsur- 
ance, 213;  airplane  insurance,  217;  fire 
insurance,   220. 

English  court  decisions  on  war  insurance 
contracts,   34. 

F.nglish  life  offices,  war  mortality  and,  114. 

Equitable  Life  Assurance  Society,  war 
clauses  of,   69. 

Equitable  Life  Insurance  Company,  war 
clauses  of,  66. 

Evils  of  United  States  pension  system,  153. 

Family  allotments.      See  Allotments,  family. 

Finances  of  English  fire  insurance  com- 
panies, 221;  statistics,  222,  224,  225,  226. 

Finances  of  life  companies,  81;  premium 
income,  82;  depreciation  of  securities, 
84;  English  companies,  87;  participation 
in  government  loans,  94;   taxation,  98. 

Fire   hazards,   new,    207. 

Fire  insurance:  taxation,  loi;  new  indus- 
trial   hazards,    208;    moral    hazards,    209; 


899 


300 


INDEX 


difficulty  in  increasing  rates,  211;  in- 
crease in  operating  expenses,  211;  rein- 
surance, 212;  bombardment  and  air- 
plane risks,  217;  in  England,  220;  in 
United  States,  227;  in  France,  238;  in 
Germany   and   Austria,   242;    in   Sweden, 

244- 

Foreign  companies,  English  decision  on 
status  of,  is;  rights  of,  17;  proclarna- 
tions  concerning,  16,  18,  20;  British 
regulations  concerning,  24;  in  the 
United  States,  229;  decision  of  Secre- 
tary McAdoo  concerning,  234. 

France:  moratoria,  40;  war  clause  in  life 
companies,  78;  mortality  experience, 
no;  social  insurance  and  pensions,  162; 
marine  insurance,  201;  fire  reinsurance, 
215,   216;   fire  insurance,  238. 

Franco-Prussian  War:  German  death  rate 
in,  61;  mortality  statistics  in  countries 
affected   by,    107,    108. 

Freight  insurance  by  United  States  Gov- 
ernment: act  providing  for,  249;  appli- 
cation blank   for,   274;    policy   form,   284. 

French  fire  insurance  statistics,  240,  241. 

German  fire  insurance  companies,  status 
of:  in  United  States,  232;  in  France 
and   England,   233. 

German   fire   reinsurance,   213. 

Germania  Life  Insurance  Company,  war 
clauses   of,    71. 

Germany:  life  insurance,  52,  96;  mortality 
experience,  117;  social  insurance,  163; 
accident  insurance,  165;  old  age  insur- 
ance, 167;  family  allotments,  169;  pen- 
sions, 170;  marine  insurance,  202;  fire 
reinsurance,  213;  airplane  insurance, 
220;   fire  insurance,  242. 

Government  aid  to  marine  insurance:  in 
England,  i8i,  286;  in  the  United  States, 
196,  249,  272;  in  France,  201;  in  Ger- 
many, 202;  in  Japan,  204;  in  Sweden, 
aos;    in    Russia,   206. 

Government  insurance:  before  the  war, 
44;  British  airplane  and  bombardment 
insurance,  217;  in  United  States,  see 
War   risk   insurance. 

Government  loans,  participation  by  life 
companies  in:  United  States,  94,  98; 
England,  94;  Australia,  96;  Canada,  96; 
Germany,   96. 

Great  Britain.     See  England. 

Great  Southern  Company,  war  clauses  of, 
69. 

Health   insurance:   taxation   of,    loi. 
Home      Life      Insurance      Company,      war 
clauses   of,   69. 

Incontestable  clause  in  life  insurance 
policies,    72. 

Increased  taxation  of  insurance  com- 
panies,  44,   98,    loi,   230,   240. 

Industrial    hazards    in    fire    insurance,    208. 

Interest,  payment  of:  American  court  de- 
cisions  concerning,    32. 

Inter-Mountain  Life  Insurance  Company, 
war   clauses   of,    70. 

Italy,  government  insurance  in,  45 ;  social 
insurance  in,    172. 

Japan:  life  insurance,  51;  death  rate  dur- 
ing Chino-Japanese  war,  61;  marine  in- 
surance,   204. 

Lapses   and   surrender   of   life   policies,    53. 
Liability    insurance:    taxation,    101. 


Life  insurance:  prewar  status  of,  46;  ef- 
fect of  war  on:  amount  written,  49; 
policy  contracts,  57;  companies'  finances, 
8:;  taxation,  98;  mortality  experience, 
105.     See  also   War   risk   insurance. 

Loans:  on  policies,  55;  participation  of  life 
insurance   companies    in    government,   94. 

McAdoo,  William  G. :  extract  of  letter  of, 
122;  conference  called  by,  199;  decision 
by,  concerning  enemy  fire  insurance 
companies,   234. 

Marine  insurance:  alien  enemies  forbidden 
to  write  policies  of,  22;  taxation,  loi; 
increased  risks,  176;  public  aid,  180;  in 
England,  181;  in  United  States,  196, 
249,  272;  in  France,  201;  in  Germany, 
202;  in  Japan,  204;  in  Sweden,  205;  in 
Russia,  205.  See  also  War  Risk  In- 
surance Bureau  Act. 

Marine   loss   settlements,    190. 

Maritime  insurance.  See  Marine  insur- 
ance. 

Maryland  Life  Insurance  Company,  war 
clauses   of,    68. 

Maternity  benefits:  English,  ijg;  French, 
163;    German,    169;    Italian,    172. 

Metropolitan  Life  Insurance  Company, 
plan  of,  for  insuring  Canadian  soldiers, 
113. 

Mexican  War,   death  rate  in,   61. 

Military  and  Naval  Insurance,  Bureau  of, 
122;    policy   for,    132. 

Military  service  clause.  See  War  clause 
in   life  insurance  policies. 

Mines,  effect  of,  on  marine  insurance,   177. 

Minnesota  Mutual  Company,  war  clauses 
of,   68. 

Missouri  State  Life  Insurance  Company, 
war   clauses   of,   68. 

Moral   hazards  in   fire   insurance,   209. 

Moratoria  and  insurance:  in  France,  40; 
in  United  States,  41,  83;  in  England,  82. 

Mortality  cost,  plans  for  meeting,  120; 
United  States  government  insurance, 
122;  terms  and  conditions  of  soldiers' 
and    sailors'    insurance,    129. 

Mortality  experience:  of  nonbelligerents, 
106;  in  France,  no;  in  Canada,  in; 
in    England,    113;    in    Germany,    117. 

Mutual  Life  Insurance  Company,  table 
showing  war   losses   of,    in. 

National  Insurance  Act  of  England,  158. 

National  Life  Insurance  Company  of  the 
United  States  of  America,  war  clauses 
of,   67. 

Navy  Nurse  Corps,  insurance  for,  126, 
13s,   147,  265,  268,  269. 

Neutral    countries:    fire    insurance   in,    244. 

Neutrals  in  Franco-Prussian  War,  table 
showing   deaths    of   combatants   and,    108. 

New  England  Mutual  Life  Insurance  Com- 
pany, war  clauses  of,  67. 

New  York  Life  Insurance  Company,  war 
clauses  of,  67. 

Nonbelligerents,     mortality     of,     106. 

Northwestern  Mutual  Life  Insurance  Com- 
pany,   war    clauses   of,    65. 

Northwestern  National  Life  Insurance 
Company,    war   clauses  of,    65. 

Occidental  Life  Insurance  Company,  war 
clauses   of,   66. 

Old  age  pensions:  in  Germany,  167;  in 
Denmark,    174. 

Operating^  expenses  of  fire  insurance,  in- 
crease   in,    211. 


INDEX 


301 


Pension  system  of  the  United  States: 
classification,  149;  service  pensions,  150; 
evils  of,    153. 

Pensions.  See  Social  insurance  and  pen- 
sions; Pension  system  of  the  United 
States. 

Policy  forms  for  United  States  govern- 
ment insurance:  crew,  276;  vessel,  277; 
voyage,   280;   cargo,    282;    freight,   284. 

Policy  forms  used  in  agreement  between 
British  Government  and  insurance  com- 
panies: standard  form  issued  by  the  As- 
sociation, 286;  reinsurance  form  issued 
by  the  government,  292;  form  issued  by 
Association  to  cover  new  voyages  during 
war,  295. 

Premium  income  of  life  companies,  effect 
of  war  on:  in  England,  82;  in  United 
States,   83. 

President  of  United  States.  See  Wilson, 
Woodrow. 

Presidential    proclamations,    18,    20. 

Private  marine  companies,   189. 

Proclamations  concerning  insurance:  Brit- 
ish,   16;   American,    18,   20. 

Property   insurance,   war   and,   9. 

Prudential  Insurance  Company  of  Eng- 
land,  war   claims   paid   by,    116. 

Prussia.      See   Germany. 

Prussian  Life  Insurance  Company,  report 
of,    117. 

Public  aid  to  marine  insurance:  English, 
181;  American,  196,  249;  French,  201; 
German,  202;  Japanese,  204;  Swedish, 
205;    Russian,   206. 

Public  custodians  of  insurance  property, 
16.   238. 

Public  insurance.  See  Government  insur- 
ance. 

Rates:  war  risk,  in  life  insurance,  77; 
table  of,  for  United  States  government 
insurance,  130,  131;  effect  of  high  ma- 
rine, 194;  difficulty  in  increasing,  for 
fire  insurance,  211. 

Reinsurance   in   fire   insurance,    212. 

Rights   of   foreign   companies,    17. 

Russia:  life  insurance,  53;  marine  insur- 
ance, 205;   fire  reinsurance,  213,   216. 

Scandinavia:    fire   reinsurance   in,    213. 

Scientific   development    of   insurance,    4. 

Secretary  of  the  Treasury.  See  McAdoo, 
Wm.    G. 

Securities  of  life  insurance  companies,  de- 
preciation in.  See  Depreciation  in  se- 
curities, etc. 

Separation  allowances.  See  Allotments, 
family. 

Service  pensions:  in  the  United  States, 
150;  statistics,  153,  154;  in  Germany, 
170. 

Social  insurance  and  pensions:  growth  of, 
12,  143;  war  effect  on,  144;  in  the 
United  States,  145;  in  Canada,  157;  in 
England,  158;  in  France,  162;  in  Ger- 
many, 163;  in  Austria-Hungary,  171;  in 
Italy,  172;  in  Switzerland,  173;  in  Den- 
mark,   1 74. 

Soldiers'  and  Sailors'  Civil  Rights  Bill,  83. 

Soldiers'  and  Sailors'  insurance:  terms  and 
conditions  of,  129;  text  of  act  provid- 
ing  for,   257. 

Spanish-American  War,  mortality  experi- 
ence in,   61. 

Statistical  tables:  Life  insurance:  amount 
in  leading  nations  in  1916,  47;  foreign 
business    of    United     States    companies, 


48;  early  effects  on  English  companies, 
50;  growth  in  Japan,  s'l  conditions  in 
Canada,  52;  surrender  values  paid  by 
English  companies,  56;  classification  of 
war  clauses  in  United  States,  62,  63; 
tabulation  of  English  war  clauses,  76; 
extra  _  premium  for  war  hazard,  78;  dis- 
tribution of  assets  and  price  movement 
of  bonds  in  United  States,  86,  87; 
finances  of  English  companies,  90-93 ; 
mortality  statistics,  106-109,  '".  "2, 
lis;  United  States  war  risk  insurance, 
129-131,  134;  total  number  engaged  in 
previous  United  States  wars,  152;  pen- 
sion statistics,  153-155.  Marine  insur- 
ance: finances  of  British  companies  for 
1914  and  1915,  192-194;  finances  of 
American  companies,  197;  business 
transacted  by  War  Risk  Bureau,  200; 
finances  of  German  companies,  202. 
Fire  insurance:  British  finances,  222- 
226;  losses  in  United  States,  191 0-191 6, 
229;  finances  of  foreign  companies  in 
United  States,  233,  236;  financial  state- 
ments of  French  companies,  240,  241; 
finance;  of  German  and  Austrian  com- 
panies, 242,  243;  premiums  and  losses 
m   Sweden,   245. 

Status  of  enemy  fire  insurance  companies 
in  United  States,  231;  statistics,  233, 
236. 

Status  of  life  insurance  before  the  war, 
46. 

Statutes  of  limitation  .American  court  de- 
cisions concerning  effect  of   war  on,   33. 

Submarine  insurance,    12. 

Surety  bonds:  taxation  of,    loi. 

Surrender   of   policies,    lapses   and,    53. 

Svveden:  marine  insurance  in,  205;  fire 
insurance    in,    244. 

Switzerland,    social   insurance   in,    173. 

Taxation,  44,   98,    loi,   230,   240. 

Terms  of  life  insurance  policy  contracts: 
modifications  necessitated  in,  57;  efforts 
to  unify  war  clause,  61;  practice  in 
United  States,  65;  disability  clause,  71; 
war  clause  in  England,  72;  rates  for 
war  risk,  77;  in  France,  78;  in  Austria- 
Hungary,   79. 

Trading  with  the  enemy:  American  act, 
22,  231;  English  act,  24;  American  court 
decisions  concerning,  25;  English  court 
decisions  concerning,  34;  German  act, 
39- 

United  States:  foreign  companies,  17,  229; 
court  decisions,  25;  moratoria,  41,  83; 
efforts  to  unify  war  clause,  61;  di- 
vergence in  practice  of  life  companies, 
65;  disability  clause,  71,  140;  Soldiers' 
and  Sailors'  Civil  Rights  Bill,  83;  stock 
exchange  situation,  86;  participation  in 
government  loans,  94;  taxation,  99,  230; 
government  insurance,  122;  social  insur- 
ance, 145;  pension  system,  149;  marine 
insurance,  196,  249,  272;  fire  insurance, 
227.     See  also  War  risk  insurance. 

Vessel  insurance  by  United  States  Gov- 
ernment: act  providing  for,  249;  in- 
structions concerning,  251;  application 
blank   for,   272;   form  of   policy,   277. 

War  claims  paid  by  English  companies, 
table   showing,    115. 

War  clause  in  life  insurance  policies:  ef- 
forts to  unify,  61;  in  the  United  States, 


302 


INDEX 


6s;   in  Great  Britain,   72;  in  France,   78; 

in  Austria-Hungary,   79- 
War  dangers  for  marine  insurance:   mines, 

177;  blockades,   178;  fire,  theft,  etc.,  179. 
War    finances    of    English    life    companies, 

87. 
War  hazards,  7.  .  ,      ,.,        «- 

War    mortality    and     English    life    offices, 

114. 
War   Revenue   Act,    99,    100,    230. 
War   Risk   Bureau,    199,   249. 
War     Risk     Insurance     Bureau     Act,     146, 

249;   amendments,   253,   257. 
War   risk   insurance  in   United   States:   let- 


ter of  Secretary  McAdoo  concerning, 
122;  chief  provisions  of,  126,  146;  terms 
and  conditions  of,  129;  probable  results 
141;  Bureau  of,  199;  acts  providing  for, 
249,  253,  257;  application  blanks  for, 
272;   policy   forms,    276. 

Wilson,  President  Woodrow,  proclama- 
tions of,    18,   20. 

Workmen's   Compensation   Act,    188. 

Workmen's  compensation  insurance:  taxa- 
tion,   JOI. 

Zeppelin  insurance,  introduced  by  Daily 
Mail,  219. 


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